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PROCEEDINGS 


BEFORE THE 

Senate of the State of New York 

ON A 

« 

l 

Message from the Governor, Recommending the 

Removal from Office 

OF 

MR, OTTO KELSEY 

4 

Superintendent of Insurance 

/ 

i ' 


ALBANY 

J. B LYON COMPANY, STATE PRINTERS 






HQS: ii 
. NtK^s • 





1 



By transfer 
The White House 
March 3rd, 1913 







■ 


»* * 










TABLE OF CONTENTS 


PAGE. 

Letter from Mr. Kelsey, declining to tender resignation as requested by 

tlie Governor . 493 

Message from Governor recommending removal of Mr. Kelsey. 3-10 

Examination of Mr. Kelsey before the Governor. 11-48 

Additional statement submitted by Mr. Kelsey. 49-51 

Judiciary Committee empowered to take testimony, etc. 51-52 

Opening address of Mr. Hatch before Judiciary Committee. 56-70 

Testimony of Mr. Kelsey . 89-496 

Judiciary Committee empowered to issue subpoenas, administer oaths, 

etc. 499-523 

Testimony of Mr. Backus.. 523-570, 606-607 

Mr. Lawshe . 570-606 

Mr. Appleton. 607-623 

Mr. Paterson . 623-631 

Mr. Behan. 631-635 

Mr. Mayer. 635-653 

Mr. Sheldon .. 653-667, 673-675 

Mr. Beddall . 667-672 

Mr. Hare... ^.,. . ... 675-680 

Mr. Herrick.? ?. I : L /'. 680-685 

Summing up address of Mr. TiatdJi before Judiciary Committee.... 686-710 

Resolution as reported by Judiciary Committee to,Senate. 710 

Debate on adoption of resolution from Judiciary Committee...*,.... 710-732 

Address of Mr. Hatch before Senate. 732-762 

Addresses on resolution to remove Mr. Kelsey: 

Senator Hinman . . . ••. 762-773 

Senator McCarren. ; .. 773-778 

Senator Hooker. 779-780 

Senator White.’.. 780-787 

Senator Page . 787-797 

Senator Armstrong. •••• 797-812 

Senator Gradv . 812-828 

Senator Fuller. 828-831 

Senator O’Xeil . 832-834 

Senator Franchot.:.834-839 

Senator Tully. 839-848 

Senator Davis .• \ 848-850 

Senator Hill. 850-853 

Senator Raines. 853-866 

Senator Saxe.:. 866-867 

Senator A lids . 867-869 

Senator Cohalan. 870-875 

Senator McCall .*.. 875-877 

Senator Smith . 877-879 

Roll call on resolution to remove Mr. Kelsey. 879 














































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State of New York 


USTo. 42. 


IN SENATE 


February 20, 1907. 

r 


Proceedings of the Senate and the Committee on the 
Judiciary upon the recommendation of the 
Governor for the removal of Mr. Otto 
Kelsey from the office of Super¬ 
intendent of Insurance. 


A message from the Governor, at the hands of his secretary, 
was received and read in the words following: 

STATE OF NEW YORK: 

Executive Chamber, 

Albany, February 20, 1907. 

To the Senate: 

I recommend the removal of Otto Kelsey from the'office of 
Superintendent of Insurance. 

With respect to life insurance, New York is easily the most im¬ 
portant jurisdiction in the United States, if not in the world, and 
the vast interests involved imperatively require, and it should be 
a point of honor for the State to maintain, a fearless and efficient 

3 










41 


Senate Judiciary Committee. 


administration of its supervising department commanding the 

confidence of the people. 

I recommend Mr. Kelsey’s removal because as head of this 
Department he has conspicuously failed to perform obvious duties 
of the first importance, and his neglect has demonstrated his 

unfitness for the trust confided to him. 

■\ 

Mr. Kelsey took office on the 17th day of May, 1906. His 
appointment was made soon after the investigation by the Joint 
Committee of the Legislature which disclosed gross irregulari¬ 
ties in the management of life insurance corporations. Official 
position had been used for private gain, and the moneys contrib¬ 
uted by the policyholders for their mutual protection had been 
wasted in a scandalous manner. Extravagant salaries had been 
paid, favorites had been permitted to enrich themselves at the 
expense of the policyholders, an elaborate system had been es¬ 
tablished for the purpose of controlling legislation in this State 
and throughout the country, and enormous sums had been secretly 
disbursed without proper vouchers. 

The revelation of these grave abuses in connection with our 
greatest fiduciary institutions shocked the civilized world, and by 
the discredit which justly attached to the administration of the 
Insurance Department, humiliated our State. 

During the period of these abuses every life insurance corpora¬ 
tion doing business within the State was required by law to make 
annual reports, to give prompt and verified reply to all inquiries 
of the Superintendent, and was subject to the examination of the 
Superintendent as often as he deemed it expedient. Upon such 
examination the production of all books and papers could be re¬ 
quired and officers and agents examined under oath. Kot only 
did this power of supervision exist, but it was supposed to be 
exercised, and official assurances from time to time were given 


Message or Governor. 


from which the policyholders had the right to infer that their 
interests were properly conserved. 

The Equitable Life Assurance Society had been examined by 
the Department in 1902; the Mutual Life Insurance Company in 
1903; and the Hew York Life Insurance Company in 1904. In 

f 

each case the examination continued through many months and 
purported to be exhaustive, but disclosed none of the improper 
practices which actually existed and which were subsequently 
brought to light by the Legislative Committee. 

In the case of the Equitable the chief examiner reported under 
date of October 13, 1902, as follows: 

“ The examination was begun in April last and has occupied 
the entire attention of the examining force until the present time. 
Every facility has been accorded them by the representatives of. 
the company in its endeavor to expedite the work and ample oppor¬ 
tunity has always been afforded to investigate and verify the nature 
of all transactions relating to the conduct of its affairs.” 

At the close of the examination of the Mutual in September, 
1903, the examiner said: » 

“ If the scope of the investigation were confined solely to ascer¬ 
taining the fact that the corporation was solvent under the law, 
that is, that its assets were properly invested thereunder and equal 
or in excess of liabilities, the time occupied in determining this 
question would be relatively limited compared to that required to 
determine likewise whether the company had been managed in 
the best interests of policyholders, the cost of whose insurance 
to them in a purely mutual company depends largely upon an 
intelligent administration of its affairs. An examination there¬ 
fore of receipts and disbursements for a series of years becomes 
necessary if we are to arrive at any idea of the conduct of a com¬ 
pany’s business, with the view of confirming the belief that the 
welfare of all policyholders has been conserved by the character 
of its management in the past. I believe the time occupied in 
establishing this fact was amply warranted. * * * Every 

facility was afforded by the company s officers and the heads of its 


G 


Senate Judiciary Committee. 


several departments to thoroughly accomplish the work which has 
been materially expedited by the admirable methods in vogue at 
the home office in the handling of accounts and keeping of books 
of initial or final entry.” 

Similarly in the case of the New York Life in 1904 the same 
examiner reported: 

“ The result of this work I believe amply justifies the con¬ 
clusion that all disbursements found to have been made incidental 
to the expense of conducting business were in no sense excessive, 
unreasonable or not warranted. The officers and representatives 
of the company gave your examiners full and free access to all its 
records and aided them in everv wav in their endeavor to accom- 

«/ t/ 

plish the work thoroughly and expeditiously.” 

These facts were presented to the^Legislature in the report of 
its Committee/ which concluded its review of the work of the 
Department with this statement: 

“ Most of the evils which have been disclosed by the investiga¬ 
tion would have been impossible had there been a vigorous per¬ 
formance of the duties already laid upon the Department, a 
vigilant watchfulness in the interest of policyholders and a cour¬ 
ageous exercise of the powers which the statute confers.” 

When Mr. Kelsey took office there was a just and insistent 
public demand that the Insurance Department should be purged 
of those responsible for its derelictions, and that men should be 
put in charge of its important work in whose capacity and fidelity 
the people could confide. The Superintendent of necessity had 
been compelled to rely upon the reports of his subordinates and 
it was patent that the paramount duty of the new Superintendent 
in order to insure efficiency in the work of the Department was to 
remove those who either had been willing to countenance, or had 
been too inefficient to discover, the abuses, the existence of which 
had brought the Department supervision into disgrace. 

Mr. Kelsey had before him the proceedings and the report of 


Message of Governor, 


7 


the Legislative Committee; he was not left in the dark as to the 
conditions which had existed. In notable instances he had specific 
information as to those within the Department who were directly 
responsible for its failures. 

The examination work in New York City for some years had 
been in charge of the First Deputy. It is inconceivable that had 
he performed his duty the conditions obtaining in the companies 
from time to time under examination could have remained undis¬ 
closed. The impropriety of continuing him in office was apparent. 
Yet nine months have elapsed since Mr. Kelsey’s appointment and 
the officer in question still remains First Deputy. 

The extraordinary reports above referred to upon the examina¬ 
tion of the three great companies were made by the chief exam¬ 
iner. His testimony before the Legislative Committee showed 
that his examinations, so far as they were a test of the character 
of the management, were a farce, and yet his reports clearly 
permitted the inference, and in one case distinctly stated that this 
matter had been thoroughly examined. Nevertheless, the chief 
examiner was retained by Mr. Kelsey for about eight months and 
until his voluntary resignation in January of this year. 

Mr. Kelsey gives the barren excuse that he had a large amount 
of work on hand and needed the services of these men while he 
was familiarizing himself with the details of the Department. 
This attitude shows his entire failure to grasp his duty. He was 
not justified in relying upon the reports of those who had been 
so conspicuously unfaithful, nor could he properly permit him- 
self to depend for information as to departmental needs upon 
those who had misled former superintendents and could not be 
supposed to have any sympathy with necessary efforts to reform 
the Department. It is difficult to exaggerate the great import¬ 
ance of the work with which those holding these positions are 
intrusted — investigating transactions of vast magnitude under 


/ 


8 


Senate Judiciary Committee,. 


conditions calling for the highest degree of confidence. It re¬ 
quires the most scrupulous fidelity. The State of New 1 ork is 
not lacking in men qualified to take such positions if one lias a 
mind to seek them. Mr. Kelsey had no right to condone the fail¬ 
ings of those who had been proved inefficient, for he owed a duty 
to the people of the. State to put the Department beyond the 
reach of just criticism and to re-establish the confidence which 
had been so seriously shaken. It was not his official function 
to commiserate or to protect, but it was his duty to take vigorous 
action which would assure to all that the great business of life 
insurance in the State of New York was hereafter to be con¬ 
ducted under vigilant supervision. 

The position of First Deputy was exempt from civil service 
restrictions. It could have been filled at any time, but Mr. Kelsey 
made no suitable effort to fill it. It appears that he intended to 
have a reorganization which he supposed might be effected in 
the early part of this year — possibly by new legislation — but 
has not yet been effected, and which incidentally would dispose 
of the First Deputy by abolishing the position as it had existed. 
Meanwhile he thought, by increased vigilance, he could use the 
present incumbent. It appears from his testimony submitted 
herewith that he did not desire to reprimand or dismiss him. 

The position of chief examiner was in the competitive class. 
No definite request was made for examinations to provide an 
eligible list until about the time the chief examiner resigned; 
nor was there any effort to procure permission to fill the place 
temporarily pending such examinations, a permission which doubt¬ 
less would have been instantly granted. 

Not only did Mr. Kelsey fail promptly to remove these sub¬ 
ordinates who had so notoriously failed in their duties, but he 
made no effort to determine the responsibility of other employees 


\ 


Message of Governor. ' 0 

for the grave defects which had existed in the work of the Depart¬ 
ment. 

He should have conducted a searching examination to find out 
whom he could trust, to determine who had been faithful and who 
faithless. He evidently had no adequate conception of his duties 
in the premises. 

Despite the evidence adduced before the Legislative Committee 
as to the efforts of the companies to control legislative and depart¬ 
mental action, and their lavish expenditure of moneys for this 

purpose, Mr. Kelsey made no inquiries to determine the relations 
of the men in the Department in order that he might be advised 
whether they were under any obligations inconsistent with their 
duty to the State. The Legislative Committee in its report com¬ 
mented upon the fact that one of the clerks in the Department had 
been appointed at the instance of Andrew C. Fields, who had been 
in general charge of the legislative enterprises of the more import¬ 
ant companies. This clerk is still in the Department, and although 
his testimony as to his relations was taken by the Committee, it 
appears that Mr. Kelsey has not read it. 

There is no satisfactory evidence that Mr. Kelsey endeavored 
to master the situation and to put the Department upon a proper 
basis. With the exception of two or three trifling changes in 
minor positions having no relation to this object, all the officers 
and employees whom he found employed in the Department when 
\ he took office, he retained until the end of the year, and I under¬ 
stand that up to the present time no dismissal has been made for 

cause. \ 

Undoubtedly the work of the Department has been onerous and 
has required a large expenditure of time and thought. Nor do I 
seek to impugn Mr. Kelsey’s integrity. 

But the more important the work of the Department the greater 
the need of making it efficient and trustworthy. The assiduity 


10 


Senate Judiciary Committee. 


of a departmental chief in attention to the details of routine can¬ 
not compensate for the lack of administrative capacity. The 
passage of laws will amount to nothing if they are not executed. 
Provisions for publicity will not avail if the supervision of the 
State be feeble and inadequate. If examinations in the future 
are to be of the same description as those in the past, the adminis¬ 
tration of the Department will not prevent a recurrence of the old 
abuses. Doubtless in former years superintendents and their 
assistants have been burdened with work, and before the Legis¬ 
lative Committee much was said of the extent of their activities. 
But comparatively few hours of well-directed labor would have 
made the Insurance Investigation unnecessary and would have 
saved us from the scandal of the past two years. 

It is my desire that the administration of the Insurance Depart¬ 
ment should be worthy of the State of Hew York and that the repu¬ 
tation of its administration should be redeemed. With the 
unparalleled size and importance of the interests committed to its 
care, it should represent the highest degree of administrative 
efficiency. There should be no taint of past scandal upon any 
person connected with it. For the sake not only of the policy¬ 
holders but of all those in any way connected with the important 
business of insurance it should be above reproach. 

I have been compelled with regret to reach the conclusion that 
Mr. Kelsey is not the man to have charge of this Department. 
His past neglect and the want of force and initiative already dis¬ 
played make it unsafe to accept assurances for the future. The 
excuses that he now makes serve only to place in a more prominent 
light his misconception of his obligations and of what the people 
of the State have a right to expect. 

With this recommendation for his removal by your honorable 
body, I transmit to you the transcript of his testimony taken be¬ 
fore me with his supplementary communication. 

CHARLES E. HUGHES. 


Examination of Mr. Kelsey Before Governor* 


11 


STATE OF NEW YOKK, 

, Executive Chamber, 

Albany, February 18, 1907. 

% 

IN THE MATTER OF THE EXAMINATION OF OTTO KELSEY, SUPERIN¬ 
TENDENT OF INSURANCE, BEFORE THE GOVERNOR. 

Gov. Hughes.— How do you do ? Mr. Kelsey, will you take a 
seat, there, please? (Indicating seat before Governor’s desk.) 

Mr. Kelsey, the Public Officers’ Law provides that whenever the 
Governor has under consideration the question of the advisability 
of recommending to the Senate the removal of any officer he may 
in his discretion take proofs. It seemed to me, in view of your 
letter and of your evident feeling that justice required the con¬ 
sideration of the facts touching your administration, that the best 
course of procedure was to take your testimony. In that way the 
facts can be suitably developed and all misapprehension avoided. 

Mr. Kelsey.— Is it a matter, Governor, that you would feel that 
I ought to have counsel, or might have, not knowing anything of 
the range of the examination ? Of course, I would be in the dark 
as to what my own requirements might be. 

Gov. Hughes.— Well, of course, counsel technically would have 
nc right to participate in the proceeding. If at any stage of the 
inquiry a matter should be presented in regard to which fairly you 
should be entitled to consult with counsel, I should be very desirous 
that you should have that opportunity without any reference to 
any technical question that might be involved. It is my desire 
simply to examine you touching the matters with which you are 
personally acquainted, your own attitude, and your own acts; and 
I confess Ido not see how counsel could be of any assistance to you. 

Mr. Kelsey.— Probably not, Governor, I don’t care for it. Was 
it your idea that you would take any extended time, Governor? 

Gov. Hughes.— Well, I can’t say how long. I desire simply, as 
I have said, to get at the facts and much will depend upon the 
course of the examination as to the time that it will take. 

Mr. Kelsey.— I should be happy to furnish what I can, of 
course. 

Gov. Hughes.— Certainly. Oh, you will have ample oppor- 


12 


Senate Judiciary Committee. 


j 


tunity in case anything conies up where you need to refresh your 
memory in any way. 

Mr. Kelsey.— I should feel confident from my knowledge of 
you that I would. 

Gov. Hughes.— Certainly. I do not desire that anything should 
be done that would put you to the slightest disadvantage. 

Mr. Kelsey.— The only reason for my asking, Governor, was 
the unexpected suddenness, as you might say, of being asked to 
come in and not knowing the scope of the examination at all, 
simply preparatory as to what might be desired hereafter, if it was 
to extend over to-day, or anything of that kind. 

Gov. Hughes.— I supposed you were at all times ready to in¬ 
form me. 

Mr. Kelsey.— So far as lies in my power I certainly am. 

Gov. Hughes.— I didn’t suppose you would be in any respect 
taken by surprise. I shall endeavor to make the scope of the 
inquiry such as will be entirely proper and, as I have said, if 
there is any matter as to which you need to refresh your memory 
cr consult records, or papers, you shall have that opportunity with¬ 
out question. 

Mr. Kelsey.— The surprise, Governor, if you will allow me just 
a word, was not that you should ask it, but of the formal prepara¬ 
tion of the examination. My own idea has been that if we could 
talk together over what the situation was I could give you my idea 
of it, and the situation that I have been under, to better advantage, 
perhaps, than in a formal examination of this character, but I am 
perfectly willing to abide by your decision. 

Governor Hughes.— So much has appeared in the public press 
regarding the matter and your letter has appeared this morning, 
and the matter is regarded as one of such public concern, that it 
seemed to me most desirable that we should get at the facts and 
put them beyond the likelihood of dispute. 

Mr. Kelsey.— Very well. 

Governor Hughes.— Will you be sworn? 

(The oath was then administered by Governor Hughes to 
Mr. Kelsey.) 

The examination of Mr. Kelsey was then conducted by Governor 
Hughes as follows: 

Q. Mr. Superintendent, when did you assume your office ? A. I 
think it was May 17th. 

Q. In order that we may properly understand y 0U j attitude 






Examination of Mr. "Kelsey "Before Governor,. 13 

at that time may T ask whether yeou read the report of the Legis¬ 
lative Investigating Committee known as the Armstrong Com¬ 
mittee ? A. I had as it appeared in the newspapers. 

Q. I am not speaking of the reports of the proceedings from 
time to time, I am speaking of the report of the Committee made 
to the Legislature. A. I remember reading a synopsis of it in the 
papers and also the pamphlet when it was issued.- 

Q. When did you read the pamphlet — I assume you mean 
the published report ? A. I couldn’t give the date. 

Q. Was it before you became Superintendent? A. I wouldn’t 
be sure of that; that is in the final official form in which it was 
printed. > 

Q. After you became Superintendent did you read the report 
of the Committee? A. I have read from time to time sections 
of it. I don’t think I ever sat down and read it from beginning 
to end. 

Q. When did you first begin the consideration of the report, 
that is, you say you read sections of it, when did you first? 
A. Why, as matters came up in the Department I have occasion¬ 
ally turned and read in relation to some company, or something 
of that kind. 

Q. Did you never read the report consecutively after you became 
Superintendent ? A. I don’t know that I ever read it from be¬ 
ginning to end at one time, no. 

Q. How much did you ever read at one time? A.*I might teJl 
if I had the report, to see some companies; I should say fifteen or 
twenty pages, possibly more. 

Q. After you took office in May, 1906, did you not take up 
that report for careful study , to be advised as to the conditions 
which had been disclosed? A. I don’t think I did specifically. 

Q. Did yon take up that part of the report which concerned 
the Insurance Department ? A. I have read that. 

Q. When did you first read it? A. I couldn’t say, Governor, 
whether it was at the time that it was printed in' the papers, or 
subsequently. I had the report on my revolving desk there and 
I have referred to it frequently. 

Q. When you became Superintendent of Insurance did you 
take up that part of the report touching the Insurance Department 
for study ? A. I couldn’t say that I did for study any more than 
to read it from time to time as matters of interest came up. 

Q. You know what I mean, Mr. Superintendent, when you 


14 


Senate Judiciary Committee. 


took office did you take the report of the Committee for the purpose 
of ascertaining what/had been disclosed regarding insurance con¬ 
ditions so that you might be advised of your duty ? A. I don’t 
think that I did any more than as I told you. I had already 
read and there had been more or less talk among the people inter¬ 
ested in public affairs from time to time. 

Q. Was that all there was of it, of your consideration of that 
matter? A. That is all, beyond reading it. 

Q. In the way you have described ? A. At times, yes. 

Q. Were you advised when you took office, or shortly after, 
that very serious irregularities in the management of life in¬ 
surance corporations had been disclosed during the investigation 
of the Legislative Committee ? A. Why, I knew in a general way, 
yes, sir. There was no specific time that I had any particular 
advice in relation to it. 

Q. After you took office did you endeavor to acquaint yourself 
with the character of the irregularities which had been disclosed ? 
A. I can’t say that I studied them out any more minutely than I 
had already. I was a very busy man, Governor, in the De¬ 
partment. 

Q. You were aware, were you not, that there had been a waste 
of the monies of the policy-holders in the management particularly 
of the three companies ? A. I had, yes. 

Q. You were aware extravagant salaries had been paid? A. 
Yes. 

* 

Q. That commission contracts had been allowed to favorites in 
certain instances that were improper? A. Yes. 

Q. You were aware enormous money sums had been disbursed 
on executive order without any proper accounting? A. Yes. 

Q. You were aware that the requirements of the Insurance 
Department, intended to furnish information as to the transac¬ 
tions of the companies, had been evaded? A. Yes. 

Q. Were you also aware that there had been examinations of 
these companies made by the Insurance Department which had 
failed to disclose these irregularities ? A. I was so advised by the 
report. 

Q. You read the part of the report that bore on that? A. 
I read the whole of the report at intervals, as I say. 

Q. When did you first become informed that the Insurance 
Department had conducted examinations of these companies which 
had failed to disclose these irregularities? A. I couldn’t say 


Examination of Mr. Kelsey Before Governor 15 


the date, about the time of the examination, the Investigating 
Committee. 

Q. Then you already knew that when you took office? A. 
Certainly. 

Q. Did you become aware of the fact that the Equitable Life 
Assurance Society had been examined by the Department in 1902 ? 
A. I wouldn’t remember the date; I knew they bad been exam¬ 
ined. 

Q. Didn’t you undertake to ascertain after you became super¬ 
intendent bow late the examination had been made of the Equi¬ 
table prior to the examination which took place after the trouble 
between the officers, and whether or.not that examination had 
disclosed any of the irregularities that existed ? A. I don’t know 
that I did. 

Q. Did you become aware of the fact that the Mutual Life In¬ 
surance Company had been examined by the Department as late 
as 1903? A. I can’t recall the date now; I knew they had been 
examined, yes, sir. 

Q. Well, did you know that they had been examined not long 
before the investigation, within two or three years? A. I don’t 
remember the date. I remember your report recites as to each 
of the three companies, I think the certificates, etc., of the exam¬ 
ination. 

Q. And you also became aware of the fact that the New York 
Life had been examined as late as 1904 by the Insurance Depart¬ 
ment? A. I presume I did; I don’t recall the date now. 

Q. Now, you became aware that these examinations by the De¬ 
partment had been conducted in a manner which failed to dis¬ 
close- A. (Interrupting.) Yes, sir. 

Q. (Continuing.) -these irregularities ? A. Yes, sir. 

Q. And you knew that those charged with those examinations 
had been grossly derelict in their duty, had they not? A. So 
stated in the report. 

Q. You knew that? That was your own view? A. That was 
my own view; I had nothing to contradict it. 

Q. You knew that if in 1903 when the Mutual was examined 
those charged with that duty had properly performed it they 
would have disclosed many of the irregularities which shocked 
the public when they were brought to the public attention ? A. 
Possibly they might have; I don’t know that I could pass judg¬ 
ment on it. 




16 


Senate Judiciary Committee. 


Q. Well, you know, for example, that they would have dis 
closed the condition of the accounts in the supply department of 
the Mutual Life, didn’t you ? A. I should think they ought to. 

Q. And you know they would have disclosed the amount paid 
to Mr. McCurdy and the circumstances under which the payment 
was made? A. Well, I couldn’t remember the facts in each sep¬ 
arate case. 

Q. You know that it would have disclosed the relation of 
Mr. Fields to the Mutual ? A. I should think it ought to. 

Q. And all his transactions ? A. Yes, sir. 

Q. Yow, did you endeavor w 7 hen you became Superintendent of 
Insurance to determine or ascertain who was in responsible charge 
of those examinations? A. Well, I knew from the reports. 

Q. What deputy had charge of these examinations ? A. Rob¬ 
ert H. Hunter. 

Q. And what did you understand had been Mr. Hunter’s func¬ 
tion prior to the time yon became superintendent ? A. That he 
was the head of the Yew York office. 

Q. And as such had charge of what? A. Had charge of the 
examinations, that is, in connection with Mr. Vanderpoel. 

Q. You understood that Mr. Vanderpoel was subject to his' 
direction ? A. Well, not entirely, but that they were together. 

Q. Didn’t you understand that Mr. Hunter was in authority, 
in a position to give Mr. Vanderpoel instructions as to the course 
of his examination? A. Well, not quite to that extent perhaps, 
but as I understand, he was the deputy in charge, but in the ex¬ 
aminations my understanding was Mr. Vanderpoel in the techni¬ 
cal part of it was the responsible authority. 

Q. Did you read Mr. Hunter’s examination or testimony be¬ 
fore the Armstrong Committee ? A. I did. 

Q. Were you not advised that Mr. Hunter had authority in the 
absence of the Superintendent to direct the course of the ex¬ 
aminations? A. Well, I don’t recall what he testified to in that 
respect. 

Q. Yow, after you had become aware of the irregularities that. 
existed and of the course of the examinations and their failure to 
disclose the existing conditions, did you regard Mr. Hunter as a 
fit man to be entrusted with that w r ork? A. Yot individually by 
- himself, no. 

Q. Well, what he was entrusted with he was entrusted with 
“ individually by himself,” wasn’t he? A. Well, except we re¬ 
quired him to report in detail and take his directions from Albany. 


Examination of Mr. Ee.lsey Before Governor. 


17 


Q. When did that occur? A. That was done afterwards, and 
after I came in. 

i » 

Q. Did you regard him as a fit man to have charge of examina¬ 
tions in view of the record that was disclosed by the examination 
while he was First Deputy in Few York? A. Well, perhaps I 
ought to qualify it in that way. I regarded him as competent 
from his experience and knowledge of the details, but perhaps as 
not qualified to take the sole charge without responsibility to me. 

Q. Do you know how many years he had been in Yew York ? 
A. I do not know, I should say eight or nine, something like that. 

Q. Do you think that one in charge of the examining work in 
Yew York who through a period of years has permitted examina¬ 
tions to be conducted in such a manner, that such gross irregulari¬ 
ties could exist without being brought to the attention through the 
examination of the public can be regarded as a competent man? 
A. I thought the circumstances had changed decidedly from the 
practices that prevailed prior to that date. 

Q. What circumstances ? A. The results of the investigation, 
the new statutes that were given and the general straightening up 
of all the business affairs pertaining to life insurance companies. 

Q. You mean the companies were better managed? A. Yo, 1 
mean better behaved. 

Q. Well, “ better behaved.” Did you not understand that the 
very object of the examination had been in the past to secure 
proper publicity as to their conduct? A. I understood that is 
what it should have been. I thought it was omitted. 

Q. Then you thought in case the insurance companies were 
fetter behaved that you could regard Mr. Hunter as competent ? 
A. Yo. 

Q. Well, what was your opinion as to his competency? A. 
My opinion was that he was qualified for all the technical work 
by reason of his acqiiaintance; that when a duty was assigned to 
him for a specific case he did it effectively and reported imme¬ 
diately; that I kept in touch in regard to it enough to be con¬ 
fident that I was not being misled or- 

Q. (Interrupting.) Was he any more fit after you became su¬ 
perintendent than he was in the past? A. I presume not, but 
he had had his attention called to what had to be done. 

Q. Are you not aware that the prior superintendents of insur¬ 
ance, although technically responsible for the operation of the 
department, had been misled by their subordinates? A. Well, 
that was a conclusion that the committee came to. 

2 



18 


Senate Judiciaky Committee* 


Q. Well, did you see any occasion to disagree with it? A. 
Well, I don’t know, Governor, that I did one way or the other. 

Q. In other words, with the many matters that, a superinten¬ 
dent must of necessity attend to from time to time, it is abso¬ 
lutely necessary that he should have deputies and subordinates in 
whom he can have confidence ? A. Precisely so. 
v Q. You know that it is impossible to check up the work of a 
man who is in charge of examinations ? A. I do. 

Q. In any effective way if he himself has a person upon whom 
he cannot rely? A. I do. 

Q. You knew that in the future it would be impossible for 
you to check Mr. Hunter’s action in any proper way so that you 
would ascertain that he was not doing his duty, if in fact he 
hadn’t? A. Well, I wouldn’t say I knew it. 

Q. In other words, you knew that you must first satisfy your¬ 
self whether he was a man in whom you were entitled to repose 
confidence? A. Well, partly that. I knew that I must have a 
qualified man and I didn’t feel I should change until I had some 
understudy or some competent man in his place. 

Q. Well, before we come to the question of making a change 
for convenience. You felt you could, remembering you had all 
the results of the committee before you and all the exam¬ 
inations of the committee that were out, you could rely on 
Mr. Hunter? A. I thought I could under the different circum¬ 
stances under which he was at work for me. 

Q. And these circumstances were your changed instructions to 
him ? A. That and a personal supervision. 

Q. Personal supervision by whom? A. Well, his frequent 
reports, his inquiries by ’phone and otherwise as to every detail 
which was to be transacted down there. 

Q. But you had to rely on the accuracy of the reports? A. 
Yes, sir. 

Q. Just as Superintendent Hendricks and Superintendent Payn 
relied on the accuracy of their reports? A. I think a little 
different. 

Q. Because it was a little more specific-A. (Interrupting.) 

Yes, sir, because he was in a different attitude in the Insurance 
Department by reason of the investigation. 

Q. Your idea was,- in spite, of Mr. Hunter’s relations to these 
examinations in the office, you could properly maintain him in 
office? A. I thought I could to the advantage of the Department, 
ves, sir. 




Examination of Me. Kelsey Before Governor. 19 

Q. And you saw no reason to make a change until it was — 
well, did you see any reason to make a change ? A. I had ex¬ 
pected to make a change. 

Q. Well, when? A. I had expected to reorganize the Depart¬ 
ment there by doing away with the first deputy. 

Q. Well, when did you expect to make a change in the personnel 
of the first deputyship ? A. I don’t know that I had a precise 
date, Governor. I thought that as the Legislature met and as 
the business was straightened out we could get rid of the delay 
and the flood of the work that came with the new law that the 
Legislature would provide for a chief examiner and an assistant 
examiner, that I would dispense with the first deputy and start 
in that way. 

Q. Well, do you mean that you thought the position should be 
abolished? A. Well, I would have the work done by the chief 
examiner instead of by the first deputy. I think the first deputy 
should be in Albany. 

Q. Did you contemplate a dismissal of Mr. Hunter ? A. Well, 
with his withdrawing from the service. 

Q: Did you contemplate his dismissal? A. You mean by 
personal letter, dismissing him ? 

Q. By your dismissing him ? A. I don’t know as I did. 1 
contemplated him being out of the department. 

Q. Well, as a result of the reorganization of it as I understand ? 
A. Partlv; it would reach that result. 

Q. If that ever took place? A. Well, I expected it would. 

Q. Provided you had the action you contemplated by the 
Legislature, otherwise not? A. Ko, I think otherwise I should 
have arranged. Mr. Hunter expressed to me himself his willing¬ 
ness to withdraw. 

Q. When was that? A. Well, it was along in the summer or 

fall. 

Q. Of what year, last year ? A. This last year^ 

Q. 1906 ? A. Yes, sir, at the time, the first of October, our 
fiscal year terminates, the expense account to the first of October 
I cut off $2,300 ; he had $5,000 and a sum allowed him, $2,300, 
for expenses. In view of the action of the Legislature in taking 
the expense accounts off from State officials generally, I made the 
same rule down there for both Mr. Yanderpoel and Mr. Hunter 
and it was in that connection that he said there wasn’t enough in 
it for him and he was ready to go. 


20 


Senate Judiciary .Committee. 


Q. And that was about the first of October? A. Well, it was 
pretty soon after; I couldn’t tell the date. 

Q. Some time in October ? A. I should say after the first week 
or such a matter. 

Q. And before that time had you said nothing to him about 
going? A. Well, I think I had talked with him before. 

Q. What had you said to him ? I wouldn’t remember the con¬ 
versation ; it wasn’t anything very definite, Governor. 

Q. Well, what was it in general, in substance? A. Well, that . 
we were likely to have a change in the department there. 

Q. A reorganization? A. And he said he understood the 
situation. 

Q. What was the situation he understood? A. Simply what 
we have been discussing, the upheaval in the insurance matters 
and the difference in the opinions of people as to how it ought to 
be conducted. He didn’t want to be embarrassing me in any way. 

Q. Did he voluntarily say this to you, or did you speak to him 
about it in the first instance ? A. I couldn’t say. It came up 
in a talk. 

Q. Well, did you have any talk with him about the difference 
of opinions that obtained with-reference to the management of 
the department? A. I have at different times. 

Q. Ho, had you at that time or previous? A. I couldn’t 
remember the date. I know Mr. Hunter was very sure that his 
record was right; that he wasn’t afraid of that, but he understood 
the feeling and the public sentiment as shown by the press, etc. 

Q. Did he tell you he felt his record was right? A. Yes, sir, 
he said it was. 

Q. What did you say to that? A. I don’t know as I made any 
direct reply. 

Q. Y' hen he told you that he thought his record was right 
and that he understood the feeling of the press, did you tell him 
what you thought of the course of the Department in connection 
with these examinations? A. The prior ones? 

Q. Yes. A. I did not. 

Q. Well, when did you first state to Mr. Hunter, if at all, your 
opinion of the prior examinations? A. I don’t recall that I ever 

did in the way of charging him with crime or anything of that 
kind. 

Q* not talking about crime. A. Well, with laxness 

or remissness. 


Examination of Me. Kelsey Before Goveenoe. 21 

Q. Didn’t you charge him with it? A. Only in discussing the 
report, „ I think, comments upon what wo all recognized as the 
situation. 

Q. ^ on speak of “ the situation,” and do I understand you 
refer to the troubled state of public opinion ? A. Possibly, 
yes, sir. 

Q. I am inquiring as to your own views. Didn’t you have 
decided views when you took office that the Department required 
overhauling and that those responsible for dereliction should be 
dismissed ? A. I expected that they would be. 

Q. Did you include Mr. Hunter in that category? A. I ex¬ 
pected in the reorganization he would be out. 

Q. And this reorganization that you speak of was a reorganiza¬ 
tion of positions and a classification; a different classification? 
A. Well, somewhat, yes, sir. 

Q. To take place in the indefinite future ? A. Ho, it was to 
take place as rapidly as could be provided and with the work we 
were conducting. 

O 

Q. Well, nine months have gone by now. Had you prior to 
two or three weeks ago any definite time fixed when it was to be 
completed ? A. Yes, sir. 

Q. When was it to be completed ? A. Anywhere about the 
present time. I expected it would be in the month of January. 

Q. In that connection with your talks with Mr. Hunter did you 
say anything to him regarding your opinion of his fitness for that 
position? A. Ho, the work he did under me was done effectively 
as nearly as I could get at it. 

Q. Was it your idea that you could deal with him so far as you 
kept close track of him, or that you could put responsible matters 
in his charge and that his record was such that you could be satis¬ 
fied with the results ? A. Well, I didn’t feel, Governor, that he 
was a man that I had got to watch every second with the line of 
his duty before him, whether it was verifying a capital statement 
or any one of the dozen things that he takes charge of. He would 
ask in detail about it, if he would go to th$ bank, or trust company. 
He used to telephone stating how he found those things and ask 
what should be done and in that way I felt we were getting along 
exceptionally well and properly. 

Q. In other words, you do have confidence in his doing the 
work which you placed in his charge ? A. Under those circum¬ 
stances, yes, sir. 


22 


Senate Judiciary Committee. 


Q. Did you retain him as First Deputy? A. Well, he has con¬ 
tinued in that same position, yes, sir. 

Q. There has been no change to the present time in his office ? 

A. No, sir. 

Q. Is he in charge of the examining work ? A. Yes, sir. 

Q. Has he been since your incumbency ? A. Well, he has been 
there in connection with Mr. Vanderpoel; he has been there in 
that connection. 

Q. Has there been any change in his official relation to the 
Department since you took office ? A. In what way ? 

Q. In any way. Does he still have the same office and the same 
duties that he previously had ? A. Well, I don’t knew exactly 
what authority he had before. He has though in the manner I 
have stated under directions. He does whatever is sent down to 
him in the way of examinations. 

Q. Have you had examinations ? A. They are all the while 
* running, Governor. 

Q. Are they in his charge as First Deputy? A. I think the 
warrant runs to him and to the examiner. 

Q. Are you positive of that? A. No, I am not, but that was 
my recollection of it, they do frequently, but whether they do in all 
cases or not I don’t know. 

Q. But so far as his having charge of the examination is con¬ 
cerned he is left there in a position of authority ? A. Yes, sir. 

Q. You rely on what he reports to you ? A. And from other 
sources; yes, sir. 

Q. What are the other sources ? A. The Chief Examiner and 
such inquiries as I make through Mr. Patterson, our Chief 
Actuary, who is in touch with the situation down there. 

Q. If you get a report in regard to financial transactions, or 
an examination in regard to the financial transactions of a com¬ 
pany from Mr. Hunter, you rely upon that report except as you 
individually may be able to make inquiries in regard to it? A. 
Yes, sir; usually the companies are notified of the report., and if 
they have fault to find in regard to it they are given a hearing; 
sometimes have side lights on it from various corporations in that 
way. 

Q. Providing they criticize it? A. Yes, sir. 

Q. I think that it has been the practice in the past, or prior to 
your incumbency, for the Chief Examiner to make a report of 
examinations? A. Yes, sir. 


Examination of Me. Kelsey Befoef Governor. 


23 


Q. Is tliat practice still continued ? A. I think so; yes, sir, I 
don’t think we had any since Mr. Vanderpoel left. 

Q. Did Mr. Hunter place in your hands any written resignation ? 
A. His talk with me was a verbal one. He said he wanted me to 
understand I had his resignation, hut I think he told me on a 
subsequent occasion he had sent a written resignation up ; I don’t 
recall having seen that. 

Q. When was that subsequent occasion? A. Well, I should 
say it was since the first of January. 

Q. Have you talked with anybody else with regard to the dis¬ 
missal of Mr. Hunter? A. I had. I don’t call it a dismissal 
though, Governor; in regard to the change in the administration 
of the Hew York office. 

Q. Well then, as I understand it, your plan was some reorgani¬ 
zation which might abolish that position? A. Yes, sir. 

Q. And might relieve Mr. Hunter of his office. It would he in 
the nature of a change in the Department rather than a dismissal 
of Mr. Hunter ? A. I think the First Deputy should be here in 
Albany with the amount of work and the responsibility instead of 
being in' Hew York at the head of the Examining Bureau, and I 
thought of a substitution from time to time as the business per¬ 
mitted, and the going in of a man trained a little for it would 
answer every purpose and would be in better business shape than 
to publicly dismiss or reprimand or reduce him in the estimation 
of his friends by that sort of a curt dismissal. 

Q. Then you thought he shouldn’t be publicly reproved or repri¬ 
manded ? A. Ho more than already had been inflicted. 

Q. What was the reason that led you to that conclusion? A. 
Well, it was a feeling of what was reasonable and right. 

Q. You sympathized with him in his position ? A. I don’t 
know as you would call it sympathy. I had consideration for 
him. In his general conduct I haven’t known of his being called 
disreputable at all. 

Q. You desire then to save him from whatever odium would 
attach to his dismissal from the servicq? A. I think there was 
no reason in my judgment of injecting Mr. Hunter in this case 
as long as I could reach the result otherwise. 

Q. You thought you could reach that result in time through 
a reorganization of the Department ? A. I thought the Depart¬ 
ment needed a reorganization and that was the understanding of 
the Committee. I wasn’t reorganizing to get rid of him. 


24 


Senate Judiciary Committee, 


Q. You were not? A. No, sir; I thought the business wasn t 
in the right shape. I think so still. 

Q. So your way of getting rid of Mr. Hunter was to have a 
reorganization? A. A reorganization. If I found it in that 
shape, and where it was satisfactory with the different incumbents 
[ should have asked him to go. 

Q. Did you make any effort after you took office to obtain a 
good man to take his place? A. Well, not until perhaps the end 
>f the year. 

: Q. You mean toward December? A. Yes. 

' Q. The place that he held was exempt, wasn’t it, from com¬ 
petitive examination ? A. I think so; it is non-competitive. 

Q. You were willing-if you got a satisfactory man to put him 
in that place? A. I had been so busy, Governor, that I had not 
felt that I had reached a point that I could dispense with him 
very easily in the usual conduct of the business. 

Q. Did it occur to you that it might be a dangerous thing to 
rely upon the reports of one who had been in charge of examina¬ 
tions for a period of years with the results shown by the Arm¬ 
strong Committee’s work ? A. I don’t think it did. I recognized 
the situation; I recognized the defective work, but I felt that 
under the changed circumstances I was getting faithful service. 

Q. Now, when you became Superintendent, who was the chief 
examiner? A. Mr. Vanderpoel. 

Q. Was he continued by you as chief examiner ? A. He was. 

Q. Did you read Mr. Vanderpoel’s testimony before the Insur¬ 
ance Committee? A. I think I did. 

Q. When did you read it? A. I couldn’t give you the date, 
Governor. 

Q. Did you know that Mr. Vanderpoel had had personal charge 
of the examination of the Mutual Life in 1903? A. I did; I 
don’t remember the date distinctly, but I remember he had charge 
of the examination. 

Q. And made the last examination? A. The one that is men¬ 
tioned in your report. 

Q. The last examination that is mentioned prior to the meeting 
of the Armstrong Committee? A. Yes. 

Q. Did you read his report of the results of that examination ? 
A. I did as it is embodied in the Committee report. 

Q. That is what I mean ? A. Yes. 


Examination of Mr. Kelsey Before Governor. 25 

Q. Did you read that after you became Superintendent? 
A. Yes. 

Q. You had brought to your mind all that Mr. Yanderpoel had 
professed not only as to examining into the condition of the com- 
pany to ascertain its solvency, but also as to ascertaining whether 
it was properly managed in the interest of its policy-holders, did 
you not? A. Yes. 

Q. I will refresh your memory by reading what Mr. Yander- 
poel says in his report with regard to the Mutual in 1903, sub¬ 
mitted to Superintendent Hendricks under date.of September 24, 
1903. He says: 

u If the scope of the investigation were confined solely to 
ascertaining the fact that the corporation was solvent under the 
law, that is, that its assets were properly invested thereunder and 
equal to or in excess of liabilities, the time occupied in deter¬ 
mining this question would be relatively limited compared to that 
required to determine likewise whether the company had been 
managed in the best interest of policy-holders, the cost of whose 
insurance to them, in a purely mutual company, depends largely 
upon an intelligent administration of its affairs. An examina¬ 
tion, therefore, of receipts and disbursements for a series of years 
becomes necessary, if we are to arrive at any idea of the conduct 
of a company’s business with the view of confirming the belief that 
the welfare of all policy-holders has been conserved by the char¬ 
acter of its management in the past. I believe the time occupied 
in establishing this fact was amply warranted. It necessitated, 
among other things, inspecting and reviewing in specific detail 
as to items contained therein the monthly reports of all agencies 
since December 31, 1897. Thus agency receipts from new and 
renewal premiums with corresponding commission disbursements 
and all expenses of every nature pertaining to the procuring of 
new business or the renewing of old have been thoroughly exam¬ 
ined, both as to domestic agencies and agencies under the super¬ 
vision of the company’s foreign department. So also have all 
disbursements for expenses properly chargeable to home office 
been exhaustively reviewed. Every facility was afforded by the 
" company’s officers and the heads of its several departments to 
thoroughly accomplish the work which has been materially expe¬ 
dited by the admirable methods in vogue at the home office in the 
handling of accounts and keeping of books of initial or final 
entry.” You read that report by Mr. Yanderpoel? A. I did. 


26 


Senate Judiciary Committee. 


Q. And you were acquainted from the matters brought out by 
the Armstrong Committee with the actual condition of things in 
the Mutual Life and the actual state of its bookkeeping? A. As 
developed later. 

Q. How, after that did you regard Mr. Vanderpoel as a fit man 
to have charge of the examination of life insurance companies ? 
A. Well, I asked him about that report and his statement of the 
reasons for its being in that form was that there was a strong con¬ 
test between our State companies and outside companies, and it 
was regarded as a proper thing to give them a complimentary 
allusion as to the details of their business. A great deal of 
this- Q. (Interrupting.) Did you regard that as an im¬ 
portant reason? A. Well, not entirely, and yet- Q. (Inter¬ 

rupting.) Well, did you in part? A. Ho, but I could see how it 
influenced him. He said something to me in the same relation 
only a little more so than Mr. Hunter as to the work; and his 
having had thirty years’ experience with the Department in the 
examinations that were pending, and until we could have a new 
examiner that was a little familiar with the business and to take 
care of it. 

Q. Did it occur to you that the greater experience he had had 
the more dangerous he might be? A. Well, I felt that it was in¬ 
cumbent upon me to use much more care, but I didn’t feel that I 
ought to dismiss a man who knew how to do the work and take 
the chance of a new man that would have to be broken in to some 
extent. 

Q. You knew that thousands of vouchers have to be examined 
in the course of an examination? A. Yes. 

Q. You knew it was absolutely impossible for you, as Superin¬ 
tendent, to check that work? A. I couldn’t do that; that is true. 

Q. You knew it was impossible for a competent and straight¬ 
forward examiner to make a report of the sort that Mr. Vander-' 
poel made if he had made a thorough examination of the books 
of the Mutual Life, didn’t you ? A. I think it was lax, yes. 

Q. Is that the strongest expression that you care to make of it, 
that it was lax ? A. I don’t think that I should be called upon to 
denounce it, Governor; it stands there and everybody can appre¬ 
ciate what it is and how it may be lax. 

Q. One of the things I want to get at from you, Mr. Superin¬ 
tendent, is whether you in fact appreciated just what the situation 
was? A. I think I did, but I felt with him as I said I felt with 






Examination of Mr. Kelsey Before jGovernor. 27 

Mr. Hunter, with the investigations going on we were getting be¬ 
hind in tlie office and that until I could make different arrange¬ 
ments I was safe to proceed with him. 

Q. Apart from the matter of convenience, do I understand that 
with these facts before you regarding his examination, you thought 
you could rely upon his reports ? A. I felt that for the time he 
was continuing I could rely upon his reports. 

Q. How, his position was in the competitive class, was it not? 
A. Yes. 

Q. Did you ask the Civil Service Commission whether they 
had an eligible list? A. I did. 

, Q. When? A. Well, I have had talks with the Civil Service 
Commission, with Mr. Birdseye, I think a couple of times, with 
the Board, along in the summer and fall, and I don’t know but 
what it might have been early in November, the last time. 

Q. Did you request them to hold an examination to provide an 
eligible list? A. I told them that we should want to have, yes. 

Q. When did you do that ? A. Well, it didn’t finally get into 
shape until within a few weeks, about the time Mr. Vanderpoei 
quit. 

Q. Why didn’t it get into shape earlier than that? A. I don’t 
know that I know of any reason beyond what I have stated, the 
pressure of work and the feeling that I was proceeding on safe 
lines until such time as I should have more time to get to it. 

Q. Did you understand that Mr. Vanderpoei had not made 
any allusion to the exorbitant payment made to Raymond & Com¬ 
pany and to Mr. McCurdy’s son-in-law and son? A. I under¬ 
stood that from the reports, yes. 

Q. Did you have brought to your attention the condition 
of the vouchers in the department under the charge of Mr. Fields ? 
A. I don’t think I did any more than as I read it there in the 
report. 

Q. Well, it was pretty fully stated there. A. I thought you 
meant outside of that, in the Department. 

Q. You knew that so far as the examination of the Mutual 
was concerned for the purpose stated by Mr. Vanderpoei in his 
report, to wit, to show that the welfare of the policy-holders had 
been conserved by the character of its management, the examina¬ 
tion was a farce, didn’t you? A. Well, I don’t know whether I 
should call it a farce because I didn’t know the opportunity he 
had. lie, with his friends, have claimed that at that time the 


i 


28 


Senate Judiciary Committee. 


statutes were not in shape, or that the accounts were consolidated 
through so many books or something of that sort so' that he 
wasn’t responsible for quite the extreme criticism that he re¬ 
ceived. 

Q. Did you look into the matter to see whether that was justi¬ 
fied? A. Yo, I did not. 

Q. Didn’t you think it important that you should know whether 
that was justified ? A. I assumed that report was correct so far 
as my relations with him were concerned. 

Q. Then you assumed that that justification didn’t exist? A. 
Yes, that is that it wasn’t controlling. 

Q. In other words, that Mr. Vanderpoel- A. (Interrupt¬ 

ing.) I didn’t doubt his sincerity and feeling that he had done 
the best he could; I didn’t really- 

Q. (Interrupting.) You didn’t doubt his sincerity? A. So 
far as his talking with me. 

Q. What did he say to you ? A. That he had not intentionally 
violated the law. 

Q. Without reference to violating the law — I don’t know ex¬ 
actly what may be considered to be involved in that — but with 
reference to the discharge of his duty as an examiner, and with 
reference to this report that he made to the Department, did 
you have any question about the fact? A. Yo, I didn’t doubt 
that, Governor. 

Q. You had. no question but that he had made a report which 
purported to show that the company was managed conservatively 
and in the interest of the policy-holders, whereas any proper ex¬ 
amination would have shown the contrary? A. Well, your ex¬ 
amination did show it. 

Q. And I didn’t have, or the committee didn’t have near ihe 
opportunities that he had. A. I think he protested that he didn’t 
have, but I don’t base anything on that. 

Q. You know it continued for several months, his examina¬ 
tion ? A. His examination of what ? 

Q. Of the Mutual. A. Oh, yes. 

Q. Yes, from I think early in the year. A. In all those big 
companies it takes six or eight months to go through them. 

Q. You were advised of the fact, were you not, that very 
large amounts of money had been disposed of of that company, 
without any other voucher than the stamp of the committee on 
expenditures, without showing the purpose for which it was 
used? A. I had read the report, ye 3 . 


i 





Examination of Mu. Kelsey Before Governor, 20 

Q. And that Mr. Vanderpoel, although professing in his report 
to pass upon the efficiency and conservatism of the management 
didn’t attempt to ascertain for what purpose the monies were 
used: vou understood that? A. Yes. 

/ t/ 

Q. You understood also in the New York Life he made an 
examination, or had it under his charge as chief examiner in 
1904? A. Yes. 

Q. Now, on August 2, 1904, he reported to Superintendent 
Hendricks'that “ The officers and representatives of the company 
gave your examiners full and free access to all its records and 
aided them in every way in their endeavor to accomplish the 
work thoroughly and expeditiously.” You understood that he 
stated that in his report? A. That was what he said; I understood 
it just as he printed it. 

Q. And that the fact was that the manner in which secreted 
assets had been held and that the manner in which the funds had 
been kept and large sums of money disbursed on the Executive 
Committee’s orders without proper vouchers was not in -any way 
referred to, or in any way reported to the Department? A. Yes; 
he was either deceived or inefficient. 

Q. And if he was deceived, you would think he was inefficient ? 
A. Yes, if it was something he should have had; I don’t know 
just what items there were, but I know in some respects he claimed 
that the items were not there, and it was by somebody “ squeal¬ 
ing,” as he called it — I think the items that were on the books 
would have afforded no trace whatever of it, that they were on 
other books of other companies, trust companies or something of 
that sort; so that was very plain in the report but it was abso¬ 
lutely impossible to reach them from the company’s books. 

Q. Did he report to you that that was the case in regard to 
the payments to Andrew Hamilton ? A. I couldn’t say as to any 
particular ones; it was only a self-justification, that he thought 
if he could have had his side presented better that your committee 
wouldn’t have been so severe against him; something of that kind. 

Q. Did you investigate that to see whether that was a reason¬ 
able attitude for him to take? A. No, I never had the time; I 
assumed the report was substantially correct. 

Q. What has been Mr. Vanderpoel’s work since you became 
Superintendent? A. He has been the chief examiner there. 

Q. What has he been doing as chief examiner? A. In charge 
of the force of examiners. 


£>EW ATE J UDICIAKY COMMITTEE. 


30 


Q. Has he been examining anything? A. Yes, they have been 
examining various companies. 

Q. Various companies? A. Well, one anyway; the Metropol¬ 
itan ; they had got started on that before I came in or about that 
time, and it has just been completed. 

Q. And reports have been made from time to time which you 
have accepted? A. I think the reason was it has been run¬ 
ning through the whole summer and is just about completed now. 

Q. Has he been left with the same authority as to examinations 
that he had prior to your incumbency? A. Practically. 

Q. There has been no change in that regard? A. Well, no 
more than what you might say was a little closer' supervision in 
Albany. 

Q. Didn’t you feel when you became Superintendent and 
became advised of these facts that it was your duty to dismiss 
Mr. Vanderpoel ? A. I thought that I should when the time came, 
as I said when I got familiar with the work and we got rid of 
the load'of extra work and I had somebody to take his place. 

Q. Did you think that you could rely upon him at all in exam¬ 
inations after the report of the Committee and the evidence stated 
as the basis for it? A. Oh, I think I could, Governor, from the 
later situation that I spoke of in regard to the other matter. 

Q. Then your thought that he should be dismissed was not be¬ 
cause you thought you could not sufficiently relv upon him ? 
A. Ho. 

Q. Any other reason ? A. Ho, not quite that. I should have 
made a change at once if the Department had been in a normal 
condition and I could have picked up a man that could fill his 
place and take charge of it. 

Q. How could you pick up a man without asking the Civil 
Service Commission to provide you with an eligible list? A. I 
couldn’t see he would have to be there at all. 

Q. Then why didn’t you at once ask the Civil Service to hold an 
examination and provide you with an eligible list ? A. I felt under 
the circumstances it was not quite the time to do it. 

Q. Why did you think that ? A. I couldn’t tell you why. I 
thought so from the surroundings. 

Q. What were they? A. Well, simply his availability and 
familiarity with the business and readiness; and I wanted and did 
use him in some of the fire insurance difficulties where his ac¬ 
quaintance with the men and his knowledge of organizing different 


Examination of Mr. Kelsey Before Governor. 31 

companies, how they were inter-related, was very useful to me in 
the investigations with the reports that we were exacting from 
them. 

Q. But you could not tell how useful or the reverse any such 
information would be unless you could absolutely depend upon 
your informant? A. That would be true. 

Q. And that continuance pending the time when you could 
arrange for a successor would of course be no reason why you. 
could not at once make that arrangement ? A. Perhaps not, from 
that point of view. 

Q. And you did not make any request to the Civil Service Com¬ 
mission to hold an examination for an eligible list until last month, 
did you? A. Well, we talked it over, I don’t know whether last 
month — last month I think was the first time. 

Q. That was the first time you made a request ? A. I told him 
our talk similar to what I stated to you, about the reorganization 
of the Department, that I thought the chief examiner and assistant 
possibly ought to be in the exempt list. 

Q. There was nothing to prevent your asking them to hold an 
examination when you came into office was there ? A. Oh, no. 

Q. Did you ask them to allow you, pending such an examina¬ 
tion, to supply or to fill that position temporarily? A. I think 
not. 

Q. What steps did you take to secure a man to fill that position ? 
A. Of chief examiner ? 

Q. Yes. A. It is simply in progress now through the Civil 
Service Commission. 

Q. You mean those are steps taken in the last few weeks ? 
A. Yes. 

Q. What steps did you take after you assumed office ? A. I took 
none except in casual conversations until this final request on 
which they are now preparing. 

Q. That is within the last couple of weeks ? A. I sould think it 
was more than, two weeks. 

Q. Well, since the first of January, 1907 ? A. Yes. 

Q. Nineteen hundred and seven? A. Yes. 

Q. The casual conversations that you refer to were with repre¬ 
sentatives or members of the Civil Service Commission? A. I 
think it was Mr. Birdseye; I remember talking to Mr. Brown 
once down to the hotel and I think Mr. Millihen. 

Q. Outside of those didn’t you make efforts to get another man 



32 


Senate Judiciary Committee* 


to take that place? A. Well, outside of that it was purely per 
sonal inquiry. 

Q. Did you make such personal inquiry ? A. I did. 

Q. Where ? A. Well, it was in relation to a man in Massa¬ 
chusetts, another in I think Illinois; there had been suggestions 
whom we could get, the difficulty of picking a man that was quali¬ 
fied, that had actual experience in the work and getting him away 
from the big life insurance companies without any affiliation; 
T found it a difficult thing to do. 

Q. When you became Superintendent in May did yon take up 
at once the question of getting a man for the Department ? A. 
Ho, I did not. 

Q. How soon after did you take it up? A. Well, I couldn’t 
give you the date, it was simply on my mind from time to time. 
We have, as I think I have told you, Governor, been pretty 
seriously rushed all the summer, so that time was pretty well 
taken up outside of that and I probably didn’t get at it as soon 
as I would otherwise. 

Q. Do you remember a conversation that you had with Senator 
Armstrong and myself at the Bar Association ? A. I remember 
being there, Governor. 

Q. When was that? A. I don’t recall that date. 

Q. Wasn’t it last summer ? A. It was in the summer, yes. 

Q. Was it in June or the early part of July? A. I couldn't 
fix the date without reference; I may have some reference. 

Q. I sailed in July, I think it was before that? A. It was 
prior to that I think. 

Q. Do you remember what that conversation was about? A. 
Well, we were there I think from about eight o’clock, Governor, 
until towards midnight. 

Q. Y es. A. And I had memoranda as to a great many inquiries 
made in relation to the new section. We discussed those general 
different views that the Committee may have had in formulating 
it in connection with the inquiries I had been receiving. 

Q. Was anything said in regard to a change in the personnel 
of your Department ? A. Well, I don’t recollect that distinctly, 
Governor. I might if you would give me the conversation. 

Q. Do you recall Senator Armstrong saying anything to you 
about the advisability of making changes in the Department ? A. 
I remember Senator Armstrong doing it, but I had forgotten it 
was at that meeting. 


Examination of Mu. Kelsey Before Governor. 


33 


Q. Do you recall any other time when it was done? ■/ A. I can 
only remember on one occasion having Senator Armstrong tell me 
in relation to those two men. 

Q. When was that ? A. I wouldn’t know, I have seen him so 
many times during the summer and fall and it may have been, 
I wouldn’t say it wasn’t, there because I don’t, Governor, recol¬ 
lect distinctly. 

Q. What was it that was said to you ? A. He said he thought 
that Mr. Hunter and Mr. Yanderpoel had deceived the old man, I 
think he called him, Senator Hendricks, and that a great deal of 
trouble had resulted to the Department, so that if he were in my 
position he should be dispensing with their services just as soon 
as he could, something to that effect anyway. 

Q. Didn’t he tell you that there should be a change in respect 
to those men in the Department in his judgment at the time of 
the conversation when I was present at the Bar Association last 
summer? A. Well, I don’t recall if he did; I wouldn’t say he 
didn’t; in fact, your recollection is undoubtedly true. 

Q. Do you remember I expressed an opinion at that time to 
you ? A. Ho, I don’t, Governor. 

Q. You do not? A. Ho, and yet you may have done so, my 
mind was more on my recollection. 

Q. Don’t you remember I supported very emphatically what 
Senator Armstrong said? A. I don’t doubt that you would, but 
I don’t recall that you actually did. 

Q. You had no doubt, did you, at that time, that there was good 
reason for dispensing with their services? A. I thought there 
was sufficient, yes. 

Q. But you thought you could safely retain them? A. Well, 
I thought until I could do better- 

Q. (Interrupting.) And you made no effort to get an eligible 
list until this last month? A. Well, I don’t quite look at it in 
that way. The result of getting actually to the selection of a can¬ 
didate, of getting the questions printed, has developed in the last 
few weeks, but there has been no shifting of opinion about it for 
two or three months. 

Q. Did Mr. Vanaerpoel resign recently? A. I think about the 
1st of January. 

Q. To take effect at what time? A. I wouldn’t recall that, I 
know that he has gone. 

Q. Was it to take effect the 1st of February.? A. It seems to 

me it was, I wouldn’t be sure, but it is equivalent to that. 




34 


Senate Judiciary Committee. 


Q. Do you remember of seeing in the report of the Armstrong 
Committee a statement to this effect: U A former clerk of Fields, 
on his recommendation and that of Mr. McClelland, was ap¬ 
pointed in 1896 an examiner in the State Insurance Department 
and still continues in such service ” ? A. I don’t remember that. 

Q. When you read the report of the Committee didn’t you have 
it brought to your attention that there was an examiner in the 
Department who had been appointed on the recommendation of 
Andrew C. Fields? A. Ho, sir, I don’t know that. 

Q. Did you make any examination of the roster of employes 
for the purpose of ascertaining who had influenced their appoint¬ 
ments and what their relations were after you took office i A. I 
don’t think I did, most of them are of a number of years’ employ¬ 
ment there. 

Q. Did you examine the index of the proceedings of the Arm¬ 
strong Committee to see what persons in the Department bad 
been examined as witnesses ? A. I think I did there. 

Q. Did you find the testimony of Mr. Cunningham? A. Ho, 
that is, if I did, I don’t recall now having read it. 

Q. You have an examiner in the Department by the name of 
J. J. Cunningham, haven’t you ? A. He is appointed an exam¬ 
iner, but he is the office clerk there at the Department. 

Q. At the office in Hew York? A. At the office. 

Q. He is employed there? A. Yes, he doesn’t do any examin¬ 
ing work, hasn’t. 

Q. What work does he have? A. The office there; he is at 
the office and what little writing of letters and running of er¬ 
rands and taking care of the telephone and telling visitors and 
inquirers as to where men may be or what is going on; he is 
there at the office all the time in attendance. 

Q. I think I have asked you whether you read his testimony. 
A. I don’t recall reading'that, Governor. 

Q. Have you made inquiries with regard to the different men 
in the Department? A. Why, more or less. 

Q. What relations they sustained? A. I don’t know as to 
their relations, I say most of them are men of a great many 
years ’service there and I have heard nothing to their discredit. 

Q. Didn’t you think it was incumbent upon you, in view of the 
ineffectiveness of the Department, to find out who was responsi¬ 
ble and what the relations and history of the different employes 
was ? A. I don!t think the subordinate employes had ever come 


Examination of Mr 


Kelsey 


Before Governor, 


° K 

O i) 


into my mind that way, and certainly it wouldn’t Mr. Cunnning- 
ham, who, so far as I know, was merely the office boy, the clerk 
in charge. 

Q. Does it surprise you to be told that one who had originally 
been put into the Department on the recommendation of Andrew 
C. Fields and who during his continuance in the Department fre- 
4 iiently visited the Supply Department of the Mutual Life was 
still employed in the Insurance Department ? A. Why, it prob¬ 
ably would if I had heard it in that shape; would depend a little 
on who it would be, of course. 

Q. Have you formed any judgment as to the. work that Mr. 
Andrew C. Fields was engaged in? A. Well, based on news¬ 
paper report and on the report of the committee, I should have, 
that is the legislative you mean ? 

Q. You would consider it of considerable importance tha< 
there should be no avenue of communication between the De¬ 
partment and Mr. Fields, should you not ? A. Yes. There never 
has been that I know of. 

Q. Did you never take up the proceedings of the Armstrong 
Committee to ascertain just what there was in them that bore on 
the Department and the responsibility of the men connected with 
it ? A. I don’t think I did further than we have been discussing, 
so’far as Mr. Hunter and Mr. Vanderpoel are concerned; they 
were the men in charge, the others were clerks. 

Q. It appeared in the course of the examination before the 
Armstrong Committee that in the case of the * Equitable Life 
Assurance Society what were called “ end of the year loans ” 
had been made, sometimes in the names of clerks for the purpose 
of increasing the collateral loans reported to the Department at 
the end of the year and of decreasing the amount of cash on hand 
as reported ? A. Yes. 

Q. You were aware that that had been so? A. I have read 
that and so understand it. 

Q. You w r ere aware that it appeared that that matter had never 
been brought out in any examination of the Equitable? A. I 
couldn’t say that, I remember the significance of that fact without 
making — 

Q. (Interrupting.) You don’t remember ? A. As to its being 
brought out. 

Q. You don’t remember it in any examination of the Depart¬ 
ment, I mean examination conducted by the Insurance Depart¬ 
ment ? A. Ho, I don’t remember as to that 


36 


SiSJNATE J UE1C1A11Y COMMITTEE. 


i 


i 

Q. Did you endeavor to ascertain who was responsible in the 
Department for that failure ? A. !Nb, I did not beyond the 
assumption that the chief examiner would be the man probably. 

Q. Did you examine to ascertain who in the Department re¬ 
ceived these reports from the companies and was responsible for 
looking over them and checking significant items that should be 
examined? A. Well, I knew the course is through our statis¬ 
tician, Mr. Crippen. 

Q. Or make an examination to ascertain who was responsible 
for the neglect in regard to it? A. I don’t think I did; if the 
matter had occurred under the former administration, I don’t 
think I have. 

Q. Dor example, when it appeared that several millions of dol¬ 
lars had been borrowed towards the end of the year by men whose 
names were not known as ordinarily borrowers to such an extent ? 
A. Capitalists. 

Q. Capitalists, so called; did you seek to ascertain why that 
was not made the subject of inquiry and who in the Department 
was responsible ? A. I don’t think I have as yet, Governor. 

Q. When, for example, the Mutual Life’s report for 1904 
showed there were no gains or losses from securities, as was 
brought out in the course of the insurance investigation and com¬ 
mented upon in the report of the committee, although in fact 
there had been large gains which were applied to the purpose of 
reducing the book values of real estate, did you make any inquiry 
to find out how such a matter escaped attention ? ' A. I have not, 
I am frank to say, Governor, I haven’t gone back in any of the 
former administrations ; the new statutes have put it on a new 
basis and as yet I haven’t had time. 

Q. The new statutes increase the number of details ? A. That 
they are required to report. 

Q. The object of my inquiry was to ascertain the efforts that 
you had made to localize responsibility for past neglect so that 
you could see whom you could trust and who was deficient and 
derelict in the Department? A. That has not been done, Gov¬ 
ernor, as yet. 

Q. For example, in connection with the Washington Life an 
examination it appeared was ordered after some attention had 
been given the matter of their reported lapses in some weekly 
insurance paper and it became a matter of inquiry in the course 
of the investigation as to how matters of that description could 


Examination of Mr. Kelsey Before Governor. 


3? 


have escaped the attention of the Department when the material 
was all at hand in the reports that were submitted to the Depart¬ 
ment. That also was commented on by the Armstrong Committee. 
Now, did you make an examination to see who was responsible 
for that ? A. No, there has been talk once or twice, I recall, in 
regard to the Washington Life with assistants in the Department, 
but not with the idea of punishing anybody. 

Q. Well, whether punishment would follow would depend on 
the nature of the information elicited ? A. Yes. 

Q.^I am speaking now of the efforts that yon have made to 
ascertain who in the Department was responsible for what it ap¬ 
peared the Department had failed to do; have you made such 
efforts ? A. I haven’t made any special study on that line, no. 

Q. Well, how could you ascertain whether your Department is 
brought up to the proper grade of efficiency if you make no effort 
to localize responsibilities for past misconduct or nfeglect ? A. Well, 
T have the daily experience of the business that we are transacting 
and if I come upon information that looks like dereliction in the 
past I should expect to follow it up and show. 

Q. You were aware that was precisely the attitude of the former 
superintendent who hadn’t the advantage of a legislative investi¬ 
gation to show them the chance of their mistake ? A. I don’t ex¬ 
pect to have any man that is inefficient or untrustworthy, but I 
haven’t had the time,- Governor, to go back and look into all the 
details that were brought out on this investigation. 

Q. Have you conducted any investigation in the Department for 
the purpose of ascertaining just what each man has done in the past 
and who has been neglectful and who has been industrious and 
faithful? A. Not as to who has been neglectful particularly, I 
have had the usual inquiries as to the different rooms, the different 
bureaus, the men who are employed, the work they were doing in 
systematizing and improving it. 

Q. Didn’t you realize when you took office that the failure of 
the Insurance Department by proper publicity to prevent or to 
expose the conditions that were shown to exist had amounted to a 
public scandal ? A. Yes, sir. 

Q. Didn’t you realize that it was one of your first duties to put 
that Department upon a proper basis of efficiency to prevent any 
recurrence of that ? A. I believe it is and to give full publicity to 
all that the statute requires. 

Q. You understood that it was essential that you should as they 


38 Senate Judiciary Committee, 

say “ Clean house ” in the Department ? A. Well, not in the sense 
of dismissing the men that were necessary for the conduct of the 
daily business in a bunch, or anything of that kind. If I found 
men inefficient, or untrustworthy I should expect to dispense with 
them. 

Q. How could you expect in your position necessarily dependent 
upon the information given you by your subordinates to find out 
who could not be trusted if you did not avail yourself of proved 
cases of neglect and endeavor to fix the responsibility for that ? 
A. That would be material as one source of information; I should 
judge my own experience worth something. 

Q. Yes, but you did not take up the other line? A. I did not 
take up the report as a guide and make a special investigation 
under the provisions of that. 

Q. In looking at the roster of your employees the first change 
that I find, apart from promotions or change in designation, the 
first withdrawal from the department I find was the resignation 
October 15, 1906, am I right in that? A. I don’t know who was 
the officer. 

Q. That apparently was only a clerk who resigned ? A. Oh, 
he was the entry clerk; something like that. 

Q. Then there was a stenographer who resigned about October 
15 ; Mr. Parker resigned on December 31 ? A. In Hew York. 

Q. With those exceptions, the persons who were in the Depart¬ 
ment when you took office remained in the Department until the 
end of last year, 1906? A. I think practically all; they are all 
civil service. 

Q. Are any of them veterans? A. l r es,. I think there are one 
or two. 

Q. Who are they? A. I think Mr. Whitbeck is a veteran in 
the actuary department and possibly another one or so, but that 
is the only one I know. 

Q. That doesn’t really cut any figure in the matter, does it? 
A. Ho. 

Q. That is to say — A. (Interrupting.) Oh, no, they were all 
there, Governor, and I believed they were doing their work and 
I kept them on. 

Q. You retained them ? A. Yes. 

Q. You haven’t made up to date any changes for cause, anv 
dismissal for cause in the Department ? A. In connection with the 
report ? 



Examination of Mr. Kelsey Before Governor. 39 

Q. You can answer my question broadly. A. Ho, I have not 
in relation to the investigation. 

,Q. For any reason? You did suspend a man the other day, I 
understand, and reinstated him? A. Yes. 

Q. Apart from that there has been no suspension or dismissal 
for cause in your Department ? A. Well, I don’t recall now, I 
don’t recall any. 

Q. You have made some additions to your staff, three exam¬ 
iners, am I right in saying that? A. I think more than that. 

Q. There have been some changes in designation, I believe, 
in titular designation ? A. Some shifting around. There have 
been new examiners, then there have been promotions. There are, 
I think, seven or eight new examiners. 

Q. There have been promotions and some called confidential 
examiners are now called examiners ? A. I made them all into 
one list. They were all doing the same kind of work and all 
under different designations, some competitive and some not. 

Q. I am talking of new men that you may have taken on; how 
many did you say? For example, Mr. Saxton was there before, 
was he not? A. They were actuarial clerks, and they had been 
promoted to examiners. 

Q. Mr. Diefendorf a promotion ? A. Special examination. 

Q. Mr. Mitchell and Mr. Watkins and Mr. Talmage, those 
are new ones ? A. Mr. Mitchell is jiot new. 

Q. Mr. Watkins and Mr. Talmage? A. There is another one 
there somewhere. 

Q. Mr. Stackman is a messenger? A. He is just a messenger 
boy - . 

Q. Then there are some stenographers? A. I think there is 
another examiner; oh, his name is — 

Q. (Interrupting.) Perhaps this list will refresh your memory 
(handing paper to the witness) ? A. Mr. Peck or something of 
that kind from the Banking Department is one of the new ex¬ 
aminers. Beckwith, he is a recent one, went on the 13th of tins 

month. . . 

Q. Mr. Watkins is H. A. Watkins, he was with you m the 

Comptroller’s office, was he not? A. He isn’t in my Department. 

Q. H. A. Watkins isn’t? A. Well, he was taken from the 
Excise Department, I think he is from St. Lawrence county; he 
never was in the Comptroller’s office. 

Q. George E. Talmage? A. He was from Schenectady. 


40 


Senate Judiciary Committee. 


Mr. Watkins I think is from the Excise Department, Mr. Beck¬ 
with from the Banking Department and transferred and some 
other one. 

Q. You have spoken about the San Francisco earthquake in 
connection with jour duties; prior to jour taking office a circular 
had been issued, had there not, bj the Department calling upon 
the fire insurance companies of this State and of other States and 
foreign countries authorized to transact business in this State 
for an estimated statement of their losses ? A. There had. 

Q. In the conflagrations in San Francisco. And on Maj 12, 
1906, the Department issued a statement showing the results or 
a tabulation of the results shown bj these answers? A. Yes. 

Q. That was before jou took office ? A. Whj, the date was 
before, of course, the statement mj recollection of it is was 
issued afterwards, but I am not sure. (The Governor hands 
circular to the witness.) Yes, I remember the circular. 

Q. That was, according to its date, issued before jou took office, 
wasn’t it ? A. Yes. 

Q. Then on June 20 jou issued a circular calling for a sworn 
statement as to the losses of fire insurance companies in California 
as of June 30th, calling for certain specified information? A. 
Yes. 

Q. The results came in in Julj, I suppose, thej were called for 
as of June 30 and I presume thej should have come in in Julj? 
A. I presume so. 

Q. Thej were tabulated in this circular under the date of 
Julj 28 and that was sent out about that time? A. I presume so, 
yes. 

Q. What else did jou do besides call for that information and 
have the results tabulated down to Julj 28 in connection with the 
San Francisco fire? A. Well, there was considerable to that, 
then the correspondence that accompanied it. 

Q. That is what jou referred to, didn’t jou, in jour statement 
of what was required bj the San Francisco earthquake? A. Yes, 
partlj. 

Q. Later in the jear in accordance with an understanding had 
at a conference of insurance commissioners, in October, a state¬ 
ment as to the assets and liabilities of the companies and a 
summarj of their losses as of October 31 ? A. Yes. 

Q. That was tabulated and sent out under date of December 
7th last? A. Yes. 

Q. The correspondence in answer to those inquiries and the 


41 


Examination of Me. Kelsey Before Governor, 

tabulation of these returns is what you referred to in your refer¬ 
ence to the San Francisco earthquake? A. There was a great 
deal in addition to that, Governor. 

Q. What? A. The correspondence from policy-holders, com¬ 
panies and officers of the companies. 

Q. Making inquiries? A. Yes, as to the condition and situ¬ 
ation and what was being done, and complaints and some fear of 
failure. 

Q. You informed these various correspondents that you had 
sent for this information, or if the correspondence came in after 
that circular was prepared you sent them a copy of that ? A. Yes, 
frequently in relation to the companies, like the daily practice in 
other matters, we write to the company, get a specific statement 
in regard to their inquiry and transmit that to them, and in this 
instance of California there were various inquiries, for they were 
concerned or professed to be as to the stability of a large number 
of companies. That made some correspondence and anxiety in 
relation to that until they finally got the facts. 

Q. Kow, have you any statement that you desire to make, Mr. 
Superintendent, in regard to the conduct of the Department and 
in regard to the matters that I have inquired into, anything else 
that you desire to say ? A. I should like the privilege, Governor, 
if this has been put up as my complete record to furnish a verified 
statement from my point of view of the difficulties I have met, 
the obstacles and the rush of work from the time I took office. 

Q. I understand and don’t desire to minimize the many ques¬ 
tions of perplexing character that have come up in the course of 
your administration? A. As you may recall from our conver¬ 
sation in Yew York, it was a repetition of that nearly every day 
of my existence during the summer to the first of January. 

Q. I can understand you had very many questions to consider, 
but I want to know if there is anything you desire brought out 
beyond what you have testified to regarding the reorganization of 
the Department, the securing of an efficient Department that could 
be relied upon to enforce the statutes, if so I should be glad to 
hear it. A. Well, I can hardly carry in mind the effect of the 
questions and answers or the details that I might or might not 
want to put in. I should like to have a copy of the minutes and 
then be permitted to furnish a verified statement, if you wish it, 
as to the reasons or the effect of the examination. 

Q. I want to give you every opportunity, Mr. Superintendent, 


42 


Senate Judiciary Committee, 


but, of course, this matter has been under your advisement now 
for some little time, and you have been thinking about the course 
of administration; and remember what I said to you when we had 
our interview. I want to know it you have anything now that 
occurs to you that ought to be said ? A. Well, I think, Governor, 
there is a great deal might be said that I am not prepared to sit 
here and state right off because I couldn’t cover the points without 
going more in detail. 

Q/Is there anything to be said as to the -reasons why yoi' 
have retained the same persons who were in the insurance de¬ 
partment prior to your taking office beyond what you have al¬ 
ready said? A. Well, that I am unable to state here. 

Q. Well, why? A. Because I don’t carry in mind just what 
I have said. 

Q. You can repeat, if you choose. I want merely to be as¬ 
sured that everything which now occurs to you that ought to be 
said is said. A. Well, I don’t know that I could do that, I should 
like to look the minutes over and then see if it should be sup¬ 
plemented, or if I have left out things I ought to have said. I 
can’t recollect from your questions and my answers if I have 
covered the points as I would if we were talking just us two to¬ 
gether. 

Q. You said in your letter to me that in several conferences 
advice had been sought and obtained from a prominent member 
of the former investigating committee. ^Did you mean with re¬ 
gard to the personnel of your staff? A. Yo. 

Q. Or the making of changes in the department? A. Nc, 
it was in relation to the questions incessantly coming up for de¬ 
cision on this kind of policy forms and on the election proceed¬ 
ings and matters of that kind. 

Q. Matters of law and construction? A. Yes. 

Q. And procedure of that sort? A. Yes. 

Q. These matters that I have called your attention to with 
reference to the reorganization of the department were matters 
exclusively within your control? A. Yes. 

Q. And as to which you took your own responsibility? A. 
Why, certainly I ought to. 

Q. You had a free hand ? A. Well, I was hemmed in by the 
environment or circumstances. 

Q. What possible environment? A. Perhaps I have ineffect¬ 
ively stated. It seems to me I couldn’t dispense with the trained 


Examination of Me. Kelsey Before Governor. 


43 


men whom I could watch for the benefit of the service, as to 
attempt to put in new men with the responsibility and difficulties 
that I was meeting all the time. 

Q. Your idea of that is- A. (Interrupting.) That I was 

working out of it in the most practical, safest, sanest way for a 
department to do and time enough to do and do its work. 

Q. Your idea is that trained men who profess to make inves¬ 
tigations, which had not been made and to make reports upon 
the proper management of companies which were not justified 
by the examination had, could be depended upon? A. Ho, I 
don’t sav so. 

Q. That was your course? A. Hardly. % 

Q. How would you modify that? A. That the men who were 
competent and cultivated and were reputable men in every day 
relations of business, that in the practice under former depart¬ 
ments had been accustomed to do the business in a diffeiamt way 
than I would permit to be done could get the essential facts and 
could report honestly to the deparment what they found and 
that until such time as I was prepared to provide new men with 
some preparation for the work and responsibility it was better 
for me to work with those men who had been discredited by your 
report, perhaps, than it was to trust the other way, realizing 
that it was a temporary matter. 

Q. Is that the whole case? A. I don’t know that I have the 
whole case there, Governor. I don’t profess to be able to get right 
up and explain everything logically and consistently with no 
preparation at all. 

Q. Well, you can answer? A. A great many things occurred, 
and my going over the figures, there were different cases, reports 
that we had. I remember one case of an insolvent company where 
Mr. Vanderpoel’s knowledge of just what another company that 
had been reorganized afterwards; the men that were connected 
with the insolvent company and the men that were interested in 
starting the new one gave us the most important information as to 
what course we should take toward a receivership. 

Q. That might occur now if he was still in your employ ? A. 
A single incident. 

Q. A man of twenty odd years experience in the Department 
could furnish you information at any time in regard to something 
which came under his observation? A. He certainly could, and 
with our complications that has been a very important thing for 
me to know. 



44 


Senate Judiciary Committee, 


Q. Yon are in no better position today tban you were eight 
months ago in regard to that ? A. I think I am, Governor. 

Q. In what way ? A. The great rush of preparation for the 1st 
of January, all of our blanks and forms and interpretations of 
law and statements and things of that kind, are cleaned up and 
out of the way practically. 

Q. But during the last few months when you were assumed to 
get the Department on a proper basis, or were thinking‘about 
that, you realized it was of the greatest importance that you should 
get your information from trustworthy sources, didn’t you ? A. 
t should say so. 

Q. Of the greatest importance that in making any examination 
or inquiry you should not get any prejudiced communication ? 
A. Certainly. 

Q. That you should have those in the Department who were 
sympathetic with the reforms that were sought to bo instituted ? 
A. Perferably so. 

Q. And you should endeavor so far as possible to make an 
effort to put the Department on a proper basis to protect the policy 
holders should be successful by reason of having men who were 
not discredited, but who were enthusiastic in carrying out those 
measures? A. I should say that was the course that should be 
taken., 

Q. Do you recall it appearing* that some one who was in tin 
Department as an assistant actuary, I believe, had at one time 
been retained by an insurance company and paid a certain sum of 
money for services rendered to that company? A. Yes. 

Q. Did you examine into that ? A. I did to some extent, yes. 

Q. When did you do that? A. Oh, it was "several months ago, 
I wouldn’t know. 

Q. Is that person still retained by the Department ? A. He is. 

Q. For what reason? A. He is a very capable man. lie is in 
a subordinate capacity under the chief actuary and is a man oi 
I don’t know how many years, good many years, experience, and 
I have no reason to distrust any work that he does. 

Q. Did you take up with him the question of this employment 
to which I have referred ? A. Yes. 

Q. What did he say? A. I have in my office a typewritten 
statement that he gave me of the details. 

Q. In regard to the examination of the various reports that 
were submitted to the Department for the purpose of ascertaining 


Examination of Mr. Kelsey Before Governor. 45 

whether or not they contained suspicious items, items demanding 
inquiry, did you find out what the practice had been regarding 
that ? A. I don’t believe I get your idea. 

Q. Well, there were reports sent in from time to time from 
various companies which contained items which would suggest 
inquiries to any one anxious to know how the management of the 
companies was conducted; several of those cases were brought out 
in the course of the Legislative Committee’s examination. Did 
they lead you to make any examination in the Department and 
ascertain what the practice had been regarding them? A. Prior 
to my coming in ? 

Q. Yes. A. I don’t know there did; the directions were 
stringent since as to following up everything of that character 
and we have done so. 

Q. You still maintain a Yew York office? A. Yes. 

Q. Is there any one temporarily in Mr. Vanderpoel’s place? 
A. Well, no, we are waiting for the Chief Examiner ;Mr. Keefer, 
of whom we just spoke, is temporarily in charge of the examiners, 
part of them. 

Q. Temporarily where? A. In Hew York; there was.no other 
man in the Department who could do the work and he was sent, 
down. 

Q. Did you, in anticipation of the last election, make any plan 
for a canvass of the votes ? A. Yes. 

Q. When did you make the plan ? A. Why, they were worked 
out from time to time during the fall and then when they came 
together that election day, prior to that a little. 

Q. Did you have a matured plan for the canvass of the votes 
prior to election day ? A. Oh, no; not for the details of it. I 
had arranged for the appointment of inspectors and the authority 
they would have. 

Q. How many inspectors did you appoint? A. Eive. 

Q. In each company? A. In each company. 

Q. What led you to limit the number to five? A. I thought 
that was the best membership for efficient executive action for a 
determination. They have to act of course judicially to some 
extent, I think, in the determination of questions, and also to 
insure the attendance of a majority. 

Q. How, in anticipation of the election, did you give your 
attention to the formulation of any plan by which the votes could 
be counted ? A. Ho, that occurred at or about the time and since. 


46 


Senate Judiciary Committee. 


I was going to say at the time we went down prior to the election 
I had the counsel and the various representative men of each 
of the fusion tickets, the separate administration and opposition 
tickets meet at my Department and the matter was talked over 
quite fully. There were various conflicting notions, whether 
there ought to be forty or fifty, which seemed to the majority an 
impossible number to get any efficient action from, and it was 
finally provided and assented to that the five, with the authority • 
to employ assistants, would be sufficient. Then as it came to the 
plan, it was, I don’t know just how it came out, but it was eventu¬ 
ally suggested that two of the best known of the houses of 
accountants be askefi to consult and advise with the inspectors 
who should be appointed and be employed by them to perfect a 
scheme That would be efficient, and that course was followed. I 
haven’t the names of the houses, and this same representative of 
each one of the houses is in charge for each company. 

Q. When did you have this meeting? A. It was a day or two 
before the election or else the day before, I am not sure — no, I 
think it was on Friday or Saturday preceding. 

Q. What day was the election? A. The election was Tuesday 
I think. 

Q. That was the 18th of December? A. Yes. 

Q. Prior to the 15th of December did you have any meeting 
for the formulation of a plan? A. You mean of the inspecors? 

Q. A canvass of the votes? A. The inspectors were not ap¬ 
pointed until that time. 

Q. When did you appoint the inspectors ? A. I think it was the 
Friday preceding the election. 

Q. Didn’t you think it a matter of a good deal of importance in 
view of the possibility of a very large vote being cast that some 
plan should be matured of taking care of it in advance ? A. I did. 

Q. Why didn’t you appoint your inspectors earlier? A. Well, 
I haven’t any reason beyond that seemed to me the appropriate 
time. 

Q. You didn’t up to that time make any plan yourself which 
,could be submitted for their guidance ? A. Oh, no. 

Q. That is prior to the Saturday before the election ? A. You 
mean that the accountants finally developed ? 

Q. No, you didn’t formulate or prepare any plan for the count¬ 
ing of the votes ? A. I did not attempt to myself, no. 

Q. At any time? A. No. • 


Examination of Mb. Kelsey Before Governor, 47 

Q. I mean for the purpose of facilitating it and arranging for 
some practicable methods ? A. I arranged to have the inspectors 
of election take entire charge of that. Any appeals would lie 
from them directly to the court. 

Q. Didn’t you think it important they should have this matter 
the subject of study in advance? A. I don’t think it was; I think 
they have successful plans that are working out as it was expected 
they ought to. 

Gov. Hughes.— How, Mr. Superintendent, I desire that you 
shall have the fullest opportunity to say anything in regard to 
this matter which you care to say, provided there is no delay, and 
I shall be glad to have you submit to me to-morrow morning any 
statement that you care to make and appear for any examination 
I may care to make upon it. 

Mr. Kelsey.— I should think the scope of the examination is 
such that it would fairly entitle me to consult counsel a little. 

Gov. Hughes.— Certainly; I don’t want to foreclose you. 

Mr. Kelsey.— My counsel, the person I was expecting to have 
as counsel, is not in the city. 

Gov. Hughes.— Well, of course, I don’t want to- 

Mr. Kelsey. (Interrupting.) — I simply wanted to have it care¬ 
fully looked over and presented as it seems to me it reasonably 
ought to be. 

Gov. Hughes.— What I am desirous, Mr. Superintendent, is to 
get not of course a studied argumentative statement, 

Mr. Kelsey.— I don’t ask for that. 

Gov. Hughes.— I want the fact, I want to know what you 
thought, what you did and why you did it, fully and frankly. 

Mr. Kelsey.— Yes, that is what I concisely would like to have 
stated. 

Gov. Hughes.— I have no objection to you supplementing what 
you have said by any statement which is necessary to make this 
complete. 

Mr. Kelsey.— Possibly it is all there, Governor, hut I should 
care to look it over. 

Gov. Hughes.— If you want to submit anything to me in the 
morning I should be glad to see it. 

Mr. Kelsey.— I should think it would be only reasonable I 
should have a copy of the minutes, to go over and see what I have 
stated. I never knew a man could go on and state his position in 


/ 





48 


Senate Judiciary Committee.. 


response to questions where nobody sits by to suggest or see where 
he makes omissions. 

Gov. Hughes.— Of course you are aware it would be very im¬ 
proper for anybody to sit by you to make suggestions. 

Mr. Kelsey.— I haven’s asked for it, but in looking over the 
situation, especially where it is to some extent an indictment you 
are preparing against me- 

Gov. Hughes. (Interrupting.)—How, Mr. Superintendent, 
there is no indictment against you and there can be none except 
as the facts may warrant, and the sole object is to get out the 
facts and not have the facts concealed under any general and 
plausible statement, but to get through a proper analysis the 
actual state of the case. That is the sole object. 

Mr. Kelsey.— That is precisely what I want. 

Gov. Hughes.— I want you to supplement it and do anything 
iliat ought to be done to make it complete, but I want it a state¬ 
ment of the actual situation. 

Mr. Kelsey.— That is all I should care to give. I don’t con¬ 
sider arguments worth very much. 

Gov. Hughes.— I am informed this will be furnished in a 
couple of hours, and I shall have a copy sent to you at once and 
anything you desire to submit I shall be glad to have. 

Mr. Kelsey.— I can communicate with you if there is anything 
I ought to say and I can say in the time, and I should be pleased 
to do it. If I think there is something I ought to submit to coun¬ 
sel I ask your favor to have time enough to do it. 

Gov. Hughes.— That is a matter not within my province. What 
I want to know is whether there is any matter of fact that ought 
to be taken account of that has not been stated. 

Mr. Kelsey.— I am unable to say. 

Gov. Hughes.— That you will be able to do after you have se¬ 
cured the minutes. 

Mr. Kelsey.— Perhaps I could. 

The hearing then adjourned. 



Statement of Superintendent Kelsey to Governor. 49 

» y 

Mr. Kelsey, on February 19, 1907, submitted the following 
additional statement: 

State of Hew York, • 1 

Insurance Department, 

Albany, February 18, 1907. 

Hon. Charles E. Hughes, Governor, Executive Chamber, 
Albany, N. Y.: 

Sir. — I received a copy of the stenographer’s minutes of to¬ 
day’s hearing at 8.35 this evening, and in response to your direc¬ 
tion that there should be no delay, I have proceeded at once to 
submit the following memoranda in regard to the subjects con¬ 
cerning which you interrogated me. In the limited time per¬ 
mitted, it may not be possible for me to cover the scope of the 
inquiry as fully as I desire. 

Just prior to my assuming office the San Francisco conflagration 
occurred. I soon found the necessity of having in the examining 
force men familiar with the affairs and methods of examinations 
of the fire insurance companies. It seemed to me that Mr. Van- 
derpoel, owing to his long experience, was equipped for this ur¬ 
gent work. I was and am of the opinion that it would have 
crippled the Department to spend time endeavoring to obtain 
some new Chief Examiner while the necessity of ascertaining 
y fully the fire situation was so important and imperative. I be¬ 
lieved in this respect and with regard to all the affairs of the 
Department generally, that my first duty was to keep up the 
business of the Department and work out the mass of detail re¬ 
quired under the new laws so that they might be fully and 
effectually enforced. 

In view of the requirements of the amended Insurance Law 
as to publicity and detailed exhibits first appearing in the annual 
statements for 1906, it was my judgment that the policy-holders in 
the life insurance companies would be protected and the admin¬ 
istration of the Department safeguarded. 

It seemed to me that until the close of the year when the new 
laws would be in full force and effect in every particular, and 
until the enormous details necessary to get matters in shape for 
the beginning of the year were disposed of, that it would lead to 
confusion if changes were made, and it was always my intention 
after these problems of preparation were settled to reorganize the 
examining force of the Department. 

4 


50 


Senate Judiciaey Committee. 


Referring to the brief inquiry at the close of the examination 
as to the elections in domestic mutual life insurance companies, 
I think that the facts do not sufficiently appear in the stenog- 
grapher’s minutes. 

Selection of Inspectors .— The statute limits the appointment 
of inspectors to duly qualified policy-holders. Numerous ques¬ 
tions were presented in this connection among which were, the 
personnel, the number and the compensation of inspectors. Con¬ 
ferences were had with counsel and representatives of the opposing 
parties to the election. Different views were expressed as to the 
number of inspectors and other details. I finally determined that 
it would be impracticable to appoint a large number of inspectors 
which course would have inevitably led to disputes and delays and 
would have involved the companies in undue expense. It was a 
most difficult task to obtain inspectors of appropriate character 
and qualifications to undertake this work at a reasonable compen¬ 
sation and I made the most careful inquiries as to the record and 
reputation of the persons whose names were proposed or con¬ 
sidered. The final selection, therefore, while made and announced 
shortly before December 18th, was arrived at only after careful 
deliberation. From my study of the statute and the official advice 
received in regard thereto, I concluded that I had no authority to 
direct the inspectors as to any particular method of canvass and 
that as sworn officers it was their duty to properly canvass the vote, 
and also, that an appeal from their decision upon' any point would 
be to the courts and not to the Department. As I understood it, 
the purpose of the statute was that the Superintendent should 
supervise, but not control or direct the result of the election. 

Plan of Canvass .—The duty of canvassing the vote and certi¬ 
fying the result devolving by law upon the inspectors, I deemed it 
desirable that every facility should be availed of to effectuate a 
speedy and correct canvass. With the approval of counsel and 
representatives of the contesting parties I authorized the employ¬ 
ment by the inspectors of expert accountants of the highest repute; 
namely, Price, Waterhouse & Co., for the Mutual Life Insurance 
Co., and Touche, Niven & Co., for the New York Life Insurance 
Co. A system was devised for each of the companies differing in 
some aspects but adapted in each case, in the judgment of the 
inspectors, to the particular features arising from the different 
methods in these companies of keeping their books, records of 
policy-holders, etc. This work has been progressing steadily and 



Statement op Superintendent Kelsey to Governor. 51 


successfully in view of the magnitude and importance of the task 
and of the necessity of accuracy and of preserving a proper record 
in the event of review by the courts. All of this would satisfac¬ 
torily appear by a personal examination of the work in progress. 

Desirous of complying with your request as to a brief statement 
I beg to conclude with the suggestion respectfully made, that a full 
comprehension of my administration of the Department can only 
be obtained by an examination of the mass of work done and re¬ 
sults accomplished since my accession to office. 

Yours respectfully, 

(Signed) Otto Kelsey, 

Superintendent of Insurance. 

STATE OF NEW YORKW 
County of Albany, > ss. : 

City of Albany. J 

Otto Kelsey, Superintendent of Insurance, being duly sworn, 
deposes and says that the communication hereto attached, made 
and executed by him is ill all respects just and true to the best of 
his knowledge, information and belief. 

(Signed) Otto Kelsey. 

Sworn and subscribed to before me, 
this 19th day of February, 1907. 

(Seal) 

Thomas F. Beiian, 

Notary Public, 

Albany County. 




Senate Judiciary Committer. 


d; 


IN SENATE. 

Mr. Raines offered the following: 

Resolved, That the message of the Governor and accompanying 
papers be printed and referred to the Committee on the Judiciary, 
with instructions to report at the earliest time practicable, what 
disposition should he made of the matter. 

The President put the question whether the Senate would agree 
to said resolution, and it was decided in the affirmative. 

April 4, 1907. 

Mr. Davis offered the following: 

Whereas, The Governor has transmitted to the Senate a mes¬ 
sage under date of February 20, 1907, recommending the removal 
of Otto Kelsey from the office of Superintendent of Insurance, 
and 

Whereas, Said message was referred to the Judiciary Com¬ 
mittee, therefore, 

Resolved, That the Judiciary Committee of the Senate be, and 
they hereby are, authorized and empowered to administer oaths, 
issue subpoenas, hear counsel, employ a stenographer and have the 
testimony and proceedings in said matter printed. 

The President put the question whether the Senate would agree 
to said resolution, and it was decided in the affirmative, as fol¬ 
lows : 

For the Affirmative .— Agnew, Allds, Armstrong, Boyce, Burr, 
Carpenter, Cassidy, Cobb, Cohalan, Cordts, Cullen, Davis, Dunn, 
Emerson, Eaneher, Foelker, Franchot, Fuller, Gates, Gilchrist, 
Grrady, Grattan, Harte, Hasenflug, Heacock, Hill, Hinman, 
Hooker, Knapp, McCall, McCarren, McManus, Mullaney, 
O’Neil, Owens, Page, Raines, Ramsperger, Saxe, Smith, Sohmer, 
Sullivan, Taylor, Thompson, Travis, Wemple, White, Wilcox. 
— 48. * 



PROCEEDINGS 


OF 

Hearing held before the Senate Judiciary Com¬ 
mittee on a Message from the Governor, 
Recommending the Removal from 
Office of Mr. Otto Kelsey, 
Superintendent of 
Insurance 







PROCEEDINGS 

/ 


Proceedings of Hearing Held Before the Senate Judiciary Committee 
on a Message from the Governor Recommending the 
Removal from Office of Otto Kelsey, 

Superintendent of Insurance 


Senate Chamber, Capitol, 

Albany, March 13, 1907. 

Proceedings of Hearing Held Before the Senate Judiciary Corn* 
mittee on a Message from the Governor Recommending the 
Removal from Office of Otto Kelsey, Superintendent of 
Insurance. 

Present. — Senators Davis (Chairman, Presiding), Arm¬ 
strong, Allds, Page, Hinman, Smith, Grattan, McCarren, 
Taylor and Cohalan of the Committee. 

And Otto Kelsey, Superintendent of Insurance; 

Judge Edward W. Hatch, Counsel for Mr. Kelsey; and 
Hon. Julius M. Mayer and Mr.. D. E. Ainsworth, of 
counsel. 

The Chairman.— The members of the Judiciary Committee 
will be kind enough to take seats in the front row. 

On or about the 20th day of February, 1907, the Senate re¬ 
ceived a message from the Governor recommending the removal of 
Mr. Otto Kelsey, Superintendent of Insurance; also a transcript 
of testimony taken in the Executive Chamber and a supplementary 
communication. 

Shortly after that communication or message had been received 
by the Senate and referred to the Judiciary Committee, the Chair¬ 
man of the Committee received this communication from the Su- 
perintendent of Insurance, under date of February 20th: 

[ 55 ] 





56 


Senate Judiciary Committee. 


“ Dear Sir.— I am informed that the Governor has to-day 
transmitted to the Senate a message in which he recommends that 
I be removed from the office of Superintendent of Insurance, and 
that such message has been referred by the Senate to the Judiciary 
Committee. In that connection I beg that before any action is 
taken thereon I have opportunity to be heard before your Com¬ 
mittee, and assume that such opportunity will be granted, and 
that I may have suitable notice thereof. 

“ Very respectfully yours, 

“ OTTO KELSEY, 

“ Superintendent of Insurance 

# 

At the meeting of the Committee held last Wednesday the 
Committee adopted the following resolution: 

“ Resolved, That Mr. Kelsey be notified that this Committee 
will hear him and his counsel next Wednesday, with such docu¬ 
ments and depositions as he may see fit to submit.'’ 

The Committee is now in session for the purpose of hearing 
Mr. Kelsey in accordance with his request and the resolution 
adopted by the Judiciary Committee. 

Mr. Hatch.— Mr. Chairman, the other gentlemen associated 
with me are Mr Julius M. Mayer and Mr. Ainsworth. 

Shall I proceed, Mr Chairman ? 

The Chairman.—-Yes, if you please, Judge. 

Mr. Hatch.— Mr. Chairman and Gentlemen of the Judiciary 
Committee of the Senate: I have the honor to appear here to-day 
on behalf of Mr. Otto Kelsey, the Superintendent of Insurance 
of the State of Hew York, appointed by the late Governor Hig¬ 
gins. He has been, by the Executive of this State, recommended 
for removal. The statute under which the power thus invoked is 
exercised has been upon the statute books ever since the early 
history of the State. This is the first time in the history of the 
State of Hew York in which the power now sought to be exer¬ 
cised has been invoked. There have been upon two occasions in 
this State proceedings which were somewhat similar to this, and 
both of them arose during the administration of the same Gov¬ 
ernor. 

In 1877 Governor Robinson submitted to the Senate a recom¬ 
mendation for the removal of the Superintendent of Banks. That 
recommendation was accompanied by charges of official dereliction 
and of affirmative wrongdoing. 




Address op E. W. Hatch. 


57 


The message having been received by the Senate, the course of 
procedure adopted was the transmission of it in the first instance 
to the Judiciary Committee of the Senate, who subsequently dis¬ 
claiming that it was properly there, it was transferred to the Com¬ 
mittee on Banks, testimony was taken before that Committee, it 
had stenographers and all the appliances necessary attending upon 
the Committee which are found in the orderly course of the ad¬ 
ministration of justice which obtains in this country. The pro¬ 
ceedings of that Committee found a place in the public records of 
the State, where they may now be found by any person desiring 
to read them. 

After the Committee on Banks had heard the case for a con¬ 
siderable period of time, and the adjournment of the legislative 
session was approaching, and the case being still unfinished, the- 
Senate communicated with the Governor asking that an extraor¬ 
dinary session of the Senate be called in order that the case might 
be considered by the whole Senate, which body was charged with 
the duty and obligation of passing upon the charges thus pre¬ 
ferred. 

That course of procedure was adopted, and the proceedings be¬ 
fore the Committee Avere then abandoned. Thereafter at Sara¬ 
toga ihe case was heard by the Senate upon official charges of 
dereliction of duty, and the officer having been found guilty of 
1 hose charges, he was removed from office. 

The Senate, upon the report of the then Judiciary Committee 
of the Senate, reported a rule as to its power in this class of pro¬ 
ceedings; and that rule, as thus promulgated, has been the rule 
of the Senate from that time to this. This rule provided: That a 
majority of the Senators was essential and necessary to remove an 
officer charged with such offenses, or to remove through an exer¬ 
cise of the power under this statute. 

In 1878 there was preferred by the Comptroller of this State 
against the Superintendent of Insurance charges that he had vio¬ 
lated a statute of the State and had corruptly certified bills paid 
by insurance companies. 

Following the same course of procedure which had then been 
settled by the former case, that message was considered by the 
Senate and the hearing was held in the open Senate, testimony 
was taken and a trial was had, and, at the close of the proceedings 
and after a full and complete hearing, the Senate voted not to re¬ 
move the officer, and he was not removed. 


58 


Senate J udiciary Committee. 


In the present case a different course of procedure has J>een 
adopted. Mr. Kelsey is not now called upon to meet the open 
Senate and present his defense to whatever charge lias been pre- 
ferred against him, to offer his testimony in their hearing, and 
have their individual judgment after a consideration of that testi¬ 
mony; but the Judiciary Committee of the Senate has adopted a 
rule that either this case is different from the two former cases, or 
else that there are no charges here which Mr. Kelsey is called 
upon to meet, 

I assume that the latter was probably the controlling motive 
which induced the Committee to depart from the precedent which 
had been established in 1877. I assume that they so departed 
from that precedent because they regarded the message of the 
Governor as containing no charges against this officer wdiich au¬ 
thorized his removal from office; but that the intention was to 
invoke the bare power of the Senate which may be exercised with¬ 
out reason if it is exercised. 

I do not quarrel with that rule, because, as I understand the 
law of the State, it was possible for the people to confer the power 
upon the Senate to remove an officer without assigning any reason 
therefor; and I know of no authority in this government that can 
restrain the power thus sought to be exercised; and if any power 
latent in any part of the government was sought to be invoked to 
restrain such action, I know of no law, even if it issued a man¬ 
date, that could enforce that mandate, or make operative upon 
this body. 

It is one of those powers in the division of power that when¬ 
ever it is granted must be granted without supervisory control. 
It is that power which has been said should be exercised, or that 
its exercise is to be based upon the judgment, the discretion, the 
patriotism and the sense of justice of the persons and body who 
exercise the power. So it is above and beyond law except as the 
body resolves itself as a law unto itself. 

But think of the consequences which follow it. Under its exer¬ 
cise property rights may vanish, tenure of office cease, character be 
assassinated, and there be left no remedy. 

I say to you Senators that with this awful responsibility im¬ 
posed upon you under this law, where power must be made to 
reside in some person, and power subject to no control, that there 
is no condition in human affairs where there is such an appeal to 
the sense of justice and honor and fair dealing as in this; because 


Address of E. AY. IIatcii. 


59 


here we stop, and further we may no longer go. So I understand 
that to have been the position that lias been taken by the Senate, 
or by this Committee of the Senate, in departing from the prece¬ 
dents which were established in the cases to which I have called 
attention. 

Under such circumstances manifestly, manifestly no man should 
be deprived of any vested right of which he is possessed; no man 
should be deprived of an office, which by the very act of depriva¬ 
tion disgraces him, unless by the judgment of his peers there is 
some reason which calls for its exercise; and that reason should 
be found in evidence which establishes whatever may be claimed 
against him, beyond even the rule established in criminal cases of 
which there may be a review. 

We come, therefore, this being the law, and this being the con¬ 
dition under which this Committee and the Senate acts, we come, 
therefore, to the consideration of the question to find, if we may, 
what it is that the Superintendent of Insurance stands here at the 
bar of this Committee charged with to-day. 

It has been stated by your chairman that a communication was 
received from the Governor recommending the removal of Mr. 
Kelsey from the office of Superintendent of Insurance. I have 
examined the message and I find as stated therein that the Gov¬ 
ernor recommends Mr. Kelsey’s removal because — and I use the 
language of the message — because as head of this Department 
he has conspicuously failed to perform obvious duties of the first 
importance, and his neglect has demonstrated his unfitness for the 
trust confided in him. Then follows what I suppose may be re¬ 
garded as reasons for that general charge. I have been at a loss 
to determine why, if there was a charge, this case should not be 
heard in the open Senate; because if charges are to be heard in 
the open Senate, where a charge is made there can only be a differ¬ 
ence in degree of the charge of dereliction which is presented to 
the Senate for its action. 

Here is what seeiti to be the charges: The message proceeds 
and says that Mr. Kelsey took office on the 17th day of May, 
1906; and then it recites what has become the public history and 
public knowledge of the State, that an investigation of the insur¬ 
ance companies in the city of Hew York had disclosed that offi¬ 
cial position had been used for private gain and the money con¬ 
tributed by the policyholders for their mutual protection had 
been wasted in a scandalous manner. Extravagant salaries had 


GO 


Senate Judiciary Committee. 


been paid; favorites had been permitted to enrich themselves at 
the expense of the policyholders- 

Senator McCarren.— What page are you reading from, Judge ( 

Mr. Hatch.— Page 2. 

(Continuing) —an elaborate system had been established for the 
purpose of controlling legislation in this State and throughout 
the country, and enormous sums had been secretly disbursed with¬ 
out proper vouchers. 

There is no charge in that language of the message of a crim- 
• inal offense, and yet the language as there used is descriptive of 
such an offense. Certainly Mr. Kelsey was in nowise responsible 
for the dereliction of the insurance officials, because he was not 
then in office and had no jurisdiction over them; and if they 
were guilty of crimes, then it was not the duty of Mr. Kelsey to 
prosecute them, whether in or out of office, but it did become the 
duty of the other public officers of this State if such crimes had 
been committed that they should be prosecuted; and if there has 
been failure since that investigation to prosecute and indict any 
guilty persons for those-offenses, then it is not Mr. Kelsey who 
should he removed from office, but it is those officers charged with 
the duty of prosecuting for those offenses, who may be removed by 
more familiar power than is invoked in the present instance. 

The message proceeds: The revelation of these grave abuses in 
connection with our greatest fiduciary institutions shocked the 
civilized world, and by the discredit which justly attached to the 
administration of the Insurance Department humiliated our State. 

It then proceeds to state that during the period of these abuses 
the life insurance corporations, naming several of them, were the 
subject of investigation hv the examiners of the Department of 
Insurance of the State, one of which was a chief examiner, and 
the other a Deputy Superintendent of Insurance. The message 
then sets out quotations from those reports, and states who made 
them, and in respect to which insurance companies the facts were 
reported, and then it proceeds: When Mr. Kelsey took office 
there was a just and insistent public demand that the Insurance 
Department should he purged of those responsible for its derelic¬ 
tions, and that men should be put in charge of its important 
work in whose capacity and fidelity the people could confide. 
The Superintendent of necessity had been Compelled to rely upon 
reports of his subordinates, and it was patent that the paramount 
duty of the new Superintendent, in order to insure efficiency in 




Address of E. W. Hatch. 


61 


the work of the Department, was to remove those who either had 
been willing to countenance or had been too inefficient to discover 
the abuses the existence of which had brought the Department 
supervision into disgrace. 

The message then recites that Mr. Kelsey had before him the 
proceedings and the report of the Legislative Committee, and that 
lie had in one notable instance specific information as to those 
within the Department who were directly responsible for its 
failures. 

It says: It is inconceivable that had he performed his duty 
the conditions obtaining in the companies from time to time — 
he is speaking now of the chief examiner — could have remained 
undisclosed. And then speaking of Mr. Kelsey’s obligation in 
that connection it says: The impropriety of continuing him in 
office was apparent; yet nine months have elapsed since Mr. Kel¬ 
sey’s appointment and the officer in question still remains first 
deputy. 

Then it refers to the chief examiner, and the statement is made 
that nevertheless the chief examiner was retained by Mr. Kelsey 
for about eight months, and until his voluntary resignation in 
January of this year. 

Then it says that Mr. Kelsey gives the barren excuse that he 
had a large amount of work on hand and needed the services of 
those men while he was familiarizing himself with the details of 
the Department; and that this attitude shows his entire failure 
to grasp his duty. 

Further on the message states: 

He was not justified in relying upon the reports of those who 
had been so conspicuously unfaithful; nor could he properly per¬ 
mit himself to depend for information as to departmental needs 
upon those who had misled former Superintendents and could 
not be supposed to have any sympathy with necessary efforts to 
reform the Department. 

After setting out the difficulties and the importance of the work, 
which the message says it was difficult to exaggerate, the message 
proceeds to say: The State of New York is not lacking in men 
qualified to take such positions if one has a mind to seek them. 
And then the statement is made that he had no right to condone 
any offenses of others, that the first deputy was exempt from 
civil service restrictions, and that the position could have been 
filled at any time, but that Mr. Kelsey made no suitable effort 


62 


Senate Judiciary Committee. 


to fill it. It was intended to have a reorganization which Mr. 
Kelsey supposed might be effected in the early part of this year, 
possibly by new legislation, which would dispose incidentally of 
the first deputy by abolishing the position. 

The position of chief examiner, the message states, was in the 
competitive class; and complaint is made that Mr. Kelsey did 
not apply to the civil service examiners for an eligible list, or for 
a temporary appointment, which doubtless would have been im¬ 
mediately granted. 

It further states: Not only did Mr. Kelsey fail promptly to 
remove these subordinates who had so notoriously failed in their 
-duties, but he made no effort to determine the responsibility of 
other employees for the grave defects which had existed in the 
work of the Department. He should have conducted a searching 
examination to find out whom he could trust, and to determine 
who had been faithful and who faithless. He evidently had no 
adequate conception of’liis duties in the premises. 

The message further says: The Legislative Committee in its 
report commented upon the fact that one of the clerks in the 
Department had been appointed at the instance of Andrew C. 
Fields, who had been in general charge of the legislative enter¬ 
prises of the more important companies. This clerk is still in the 
Department, and, although his testimony as to his relations was 
taken by the Committee, it appears Mr. Kelsey has not read it. 
There is no satisfactory evidence that Mr. Kelsey endeavored to 
master the situation and to put the Department upon a proper 
basis. With the exception of two or three trifling changes in 
minor positions having no relation to this object, all the officers 
and employees whom he found employed in the Department when 
he took office he retained. 

Mindful of the duties that had been performed by Mr. Kelsey 
in part during the period of his administration, the message 
continues: 

Undoubtedly the work of the Department has been onerous 
and has required a large expenditure of time and thought. Uor 
do I seek to impugn Mr. Kelsey’s integrity; but the more im- 
. portant the work of the Department the greater the need of mak¬ 
ing it efficient and trustworthy. The assiduity in giving attention 
to the details of routine cannot compensate for the lack of ad¬ 
ministrative capacity. The passage of laAvs would amount to 
nothing if they are not executed. Provisions for publicity will 


Address of E. W. ITatcit. 


<53 

not avail if the supervision of the State be feeble and inadequate. 
And then the report concludes: “ I have been compelled with 

regret to reach the conclusion that Mr. Ivelsey is not the man 
to have charge of this Department. His past neglect and the 
want of force and initiative already displayed, make it unsafe 
to accept assurances for the future.” 

Stripped of all verbiage, omitting rhetoric and declamation, 
these charges, if this Committee so considers them, reside in the 
fact that Mr. Kelsey failed to remove two men who hold office 
under him; that while he possessed assiduity as to detail, yet it 
is charged he was lacking in administrative ability, and that he 
was deficient in initiative and force. 

There is not a lawyer upon this Committee, nor within the 
sound of my voice now, hut that would join with me in the state¬ 
ment that all of these charges contained within it if brought 
into a court of justice would not live as long as the pleader lived 
in drafting it. The very accusation is answered by the fact that 
the officer is a man of integrity; and the only charge is he lacks 

capacity or initiative force. 

% 

Whether he does or not, or whether men generally do so lack, 
would he a subject upon which most men would differ. That is 
the case here; the thing we are here to answer. If we answer 
it, if we prove to this Committee,— as I assume we will be per¬ 
mitted that opportunity in common fairness and justice; if we 
prove to this Committee that we were justified by results in the 
retention of "these men; if we prove to the Committee by in¬ 
dubitable proofs that Mr. Kelsey not only possessed assiduity 
in regard to detail but that he also possessed administrative 
capacity, as tested by results; if we prove to this Committee that 
in his acts he exhibited the highest possession, or at least a very 
capable possession of initiative and force; what then becomes 
of the charge preferred by the Governor to the Senate ? 

Let me call to the mind of the Senators that the Governor 
does not ask that you remove this man upon his suggestion; he 
recommends, upon the things which appeared before him, to you 
a certain course of action. But the law has vested you with the 
power to jointly unite with him before this removal can be 
effected; and common justice among men has demanded that you 
should not act save upon proof which justifies your action, and 
the Governor, as I understand, does not demand otherwise. 


/ 


64 


Senate Judiciary Committee. 


We shall show not only by Mr. Kelsey hut by a multitude of 
witnesses sufficient for the purpose, if we are permitted so to 
show it — and I assume we will be — that Mr. Kelsey was ap¬ 
pointed to this office by the late Governor Higgins; that he was 
appointed to the office by Governor Higgins at a time when the 
Governor was seeking from among the people of this State a man 
who would administer this office with integrity, and one whom he. 
knew he could personally trust and rely upon. 

Without solicitation upon the part of Mr. Kelsey the Gover¬ 
nor approached him and communicated to him his desire in the 
premises. AVe shall show you that it was only after urgent and 
personal request upon the part of Governor Higgins that Mr. Kel¬ 
sey finally concluded to accept the trust which the Governor de¬ 
sired to devolve upon him. 

Governor Higgins needs no encomiums of mine to add to the 
lustre of his career. He needs no certificate of character from 
any man to show that he was an honest man.. If words were 
needed attesting to his desire to deal faithfully and fairly by 
providing a competent .service to the State, they may be found in 
the graceful words uttered by his Excellency the Governor at 
the time when Governor Higgins retired to private life. 

The new Insurance Law, then the product of the Armstrong 
Committee so-called, drafted by the Governor, had been entered 
upon the statute books and became the rule of action for the 
Superintendent who should be appointed. The Governor says 
in the message that Mr. Kelsey failed to grasp the situation. 
The Governor was mistaken, certainly, honestly I doubt not, but 
still mistaken when he penned those words. Mr. Kelsey grasped 
the situation, as we shall be able to establish before this Com¬ 
mittee. He knew the peculiar conditions that existed, he knew 
that Mr. Yanderpoel had made the report which is criticized 
here; he knew that Mr. Hunter held office there. Those things 
he knew; that situation he grasped; that situation he carried to 
Governor Higgins, and consulted with him about the retention of 
the two men, discussed the conditions existing in the insurance 
world; talked over what should be done in order that the honor 
of the State might be again rehabilitated; and after a full dis¬ 
closure of the situation not only once, but dozens of times, and 
covering the whole period of the administration of Governor 
Higgins after the accession of Mr. Kelsey to office, Governor 
Higgins advised him that under the then existing conditions, in- 


Address of E. W. Hatch. 


65 


ability to procure men competent and equipped with the technical 
knowledge to fill their places, that they should for the present be 
retained in their positions in order that the business of the Depart¬ 
ment might go on. 

Suppose Mr. Kelsey had refused to act upon the advice of 
Governor Higgins, or his suggestion, at that time ? Suppose 
Mr. Kelsey had insisted upon acting, and had removed these 
men, Governor Higgins for thus disregarding his wishes in the 
matter might have invited the attention of the Senate to that 
act and recommended Mr. Kelsey’s removal because he had dis¬ 
charged these men from the service; and the same power that 
he would have exercised under those circumstances is the 
power that the Governor exercises when he sends his message to 
you. The same power in hearing that you would exercise under 
present conditions. 

How what happens? A change in the Executive takes place 
in the State of Hew York, and lo! the Superintendent is called 
to the bar by the Governor of the State and by the Senate to 
answer why he should not be removed because he acted upon the 
advice of the former Governor. 

Tenure of office becomes very precarious if one Governor may 
advise an action and the next Governor and the Senate make 
its acceptance the basis for a removal. That is the situation we 
have here. That is this situation. The question here is, whose 
judgment, of which Governor, shall obtain — the one who advised 
the retention of these men in office or the one who advises that he 
be removed because we retained them. 

I venture the assertion that never within these halls; never 
within the halls of any Legislature of which we know in this coun¬ 
try, where freedom exists and fair play is the rule, will we witness 
such another condition as this; and I hope the time will never 
come when a man shall be removed from office whose only offense 
is that he followed the wishes of one Governor, and that in so 
doing, in carrying out that wish, he did what did not meet the 
views of the subsequent Executive. 

We do not stop here. We shall show further, if we shall he 
so permitted, that the Superintendent of Insurance entered upon 
the duties of his office at the time when a new law, untried, pro¬ 
viding for a new scheme of dealing with insurance companies in 
this State, had just been placed upon the statute books. We shall 
5 



66 


Senate Judiciary Committee. 


show that in that law was a provision for four contracts to take 
the place of a large number, a standard policy to be furnished 
which in its contract provisions should take the place of three or 
four hundred other kinds of policies. It was a contract of insur¬ 
ance which should be for the protection of the policy-holders in 
the companies of this State. It was a contract which required the 
utmost care in drafting, and we shall show to this Committee that 
Mr. Kelsey grasped that situation; that he drew the standard poli¬ 
cies which met the approval of the Chairman, I believe, of the 
Armstrong Committee. They were submitted to the present Gov¬ 
ernor when finished, and invoked no criticism from him, as to 
form or matter, at least none was expressed to the Superintendent 
of Insurance. 

We shall show that these policies now furnish the fundamental 
policy for this State, upon which the right of the policy-holder 
rests; that they have received the commendation from insurance 
men all over this country and even in foreign countries, and 
thereby Mr. Kelsey has raised and lifted the Insurance Depart¬ 
ment of the State of Kew York to a plane beyond where it ever was 
before, and equal if not superior to that of any other State. 

Does that indicate that Mr. Kelsey failed to grasp his duty in 
connection with that? If it does, then there must exist in dif¬ 
ferent minds different conceptions of what constitutes a grasp of 
duty. 

We shall further show you, produce before you, an account, 
two of them, by which the business of the insurance companies 
of this State are to be measured; under which they make their 
statements to the Department; through the operation of which all 
the facts connected with their solvency and the right of policy¬ 
holders will be disclosed. 

We shall show to you with an infinite detail of work, of capacity, 
of comprehension, that involved the Superintendent and the At¬ 
torney-General and the Governor in their consideration, and also 
the insurance companies with their technical and skilled force, 
and out of that has arisen a monument to the industry and capacity 
of this man which now meets the approval of the insurance com¬ 
panies of the State, and of the people who are acquainted with it, 
and who pay attention to its work in detail. 

Does that indicate a lack of grasp of the duties which devolved 
upon him when he came to his office ? If it does, then my under¬ 
standing is different from the understanding of other men. 


Addkess of E. W. Hatch. 


67 


I want to say in addition to that that he digested all the rela¬ 
tions with foreign insurance companies in this and in other States, 
that there was had here numerous consultations between the 
representatives of companies and their lawyers from other States 
with respect to these policies and accounts, which were met 
by Mr. Kelsey and the subjects discussed intelligently and 
a conclusion reached which met the requirements of the law; 
and I defy anybody to show that in the performance of his duties 
Air. Kelsey has not gone as far in the way of reform and change 
in the administration of insurance law in this State as the statute 
itself permits. 

There is another matter which does not find place in the mes¬ 
sage, but which does find place in some testimony which was taken 
before the Governor delivered by Mr. Kelsey. That related to 
the suggestion of inefficiency in preparing a plan by which the 
votes of the great insurance companies of the State might be cast 
so that the policy-holders might give expression to their views 
in the management and government of the companies. I shall 
show in that connection that Mr. Kelsey held many consulta¬ 
tions, not only with the State officers intrusted with that duty 
but with the insurance officials of the State — with the Chair¬ 
man of the Armstrong Committee — that the language of the 
law under which he was then acting was by no means clear, 
and that it taxed the best genius — and he is possessed of much 
of it — of the late Attomev-General in the construction of the 

t/ 

statutes in connection with these insurance companies and the 
questions raised by their lawyers, of all sorts and every character; 
that he met them and exercised an independent judgment upon 
them, formulated a plan under which this vote was taken, and 
provided by his own selection men to supervise it; with the result 
that the vote of the policy-holders of these insurance companies 
is being taken to-day, and the whole of the policy-holders’ vote 
is registered with more certainty than they would be able to reg¬ 
ister it in an election in the Borough of Brooklyn. 

Failure either in initiative or of capacity to administer his 
office, or to grasp details does not seem apparent there. 

Senator MoCarren.— Judge, I hope that remark is no reflec¬ 
tion on the officials of Brooklyn ? 

Mr. Hatch.— Ho; nor on the voters. 

Do these things, if true, justify the charges which have been 
made against the Superintendent of Insurance ? Do these things, 




68 


Senate Judiciaby Committee. 


if true, justify the harsh criticisms that have been showered upon 
him by the press ? Do these things, if tme, call for his disgrace 
at the hands of this Senate by his removal from office,^ the removal 
of this man whose name brings with it a certificate of is 
integrity ? 

These things this Committee is bound to know by competent 
and proper proof; and if they act after this statement of what the 
facts are (which can be established) without taking that proof, 
then hereafter among men they shall need justification for such a 
course. 

I call attention to another matter: We shall show that im¬ 
mediately after his accession to office or immediately prior to 
it, I think on the 19th day of April, either the 18th or the 
19th day of April, there came an overwhelming calamity on the 
city of San Francisco, and under the losses sustained by the fire 
insurance companies in connection with that calamity, grave fears 
were entertained throughout not only this country but also in 
foreign countries, that many insurance companies would go to 
the wall; that receivers would be the order of the day, and the 
policy-holders would fail to receive the amounts of the insurance 
which they had carried. 

We shall show that in the administration of this office by 
Mr. Kelsey he met that situation as he met the other. We shall 
show, and beyond peradventure, that by the aid of the knowledge 
of these two men, Hunter and Vanderpoel, supplemented by their 
work, that thev rendered valuable aid and service in connection 
with this matter, that they procured the evidence and submitted it 
to the Superintendent, and that he acted upon it, promulgated 
rules, looked after the companies, and succeeded in procuring to 
be paid in by these insurance companies $83,000,000, and saved 
to the people of this State in securities over $600,000,000; and 
that he did all that with only the disaster of one,receivership to 
one small company and the forcing of others out of business. 

Does that show merely assiduity to detail ? Yes; but does it s 
not also carry with it an exhibition of administrative capacity, 
and in a high degree ? 

It is charged here—if charge it be—that we lack force and 
initiative. It is rather an intangible charge to me but still we 
roust meet this, as we met the others, by a statement of the facts. 
We shall show that Mr. Kelsey promulgated rules from time to 
time with respect to the list of policy-holders of the large in- 



Address of E. W. Hatch. 


69 


surance companies, with respect to those who should receive them, 
so that there might be protection of the policy-holder; and that 
those rules thus promulgated by him were acted upon and the 
business of the Department proceeded smoothly, decorously and 
efficiently. 

We shall not only show that, but we shall show that he traveled 
outside of the law, of the new law, examined into the fraternal 
insurance societies of this State, where at this day most of the 
wrongdoing is to be found, and that in so far as the law gives him 
the power he has corrected those abuses until he has brought them 
in some degree of relationship to the administration of the other 
insurance companies covered by the law. We shall show in addi¬ 
tion that he has exercised supervisory control, so far as the law 
will permit, over the co-operative insurance companies which do 
business mainly among the farmers. 

If the Senate, and I assume it has, if the Senate has not it 
should read Mr. Kelsey’s admirable report of this year’s work. It 
will find there with respect to the law passed by the Legislature 
when he took office, and by the law as it exists to-day, that he 
has recommended at least thirty-four different specific amend¬ 
ments to the law for the purpose of bettering conditions in the 
insurance world, and for the more abundant protection of the 
policy-holders. 

If this is not initiative; if these acts are not initiative, then I 
do not know what initiative means. These cover in detail sub¬ 
stantially the administration of the office of Superintendent of 
Insurance. What he asks here of the Committee to-day, what he 
has a right to demand, and what you have no right to refuse, even 
though you have the power to do it, is that upon these charges 
he be given the opportunity of securing what has crept into the 
nomenclature of the American people in late years as “ a square 
deal.” To that lie is entitled, and if it be denied, whatever dis¬ 
grace will come from that denial will not rest upon him. 

We ask here for a hearing — fair, free and open. We want 
our records to be scanned by the people of this State, understand- 
ingly scanned, so that they may know these things; and then if 
upon that record comes the determination that he is an unworthy 
servant, then the judgment will be so pronounced. It will, how¬ 
ever, not be so pronounced unless it rests in fact. It will not be so 
pronounced if his opportunity to be heard is strangled. Many 
men among this Senate, many men among former Senates and in 



70 


Senate Judiciary Committee. 


the halls of legislation and in other places connected with the ad¬ 
ministration of public service, know this man. lie is known at 
home. You who know him know that he never did a dishonest 

thing. You who know him know that in those places to which 

he has been called in the discharge of public duty as a public 

servant of the State, that he has discharged that duty ably and 

well, and to the satisfaction of the people of this State and to the 
satisfaction of his own conscience. 

It is thought, and I think unwittingly, because I think the 
Executive of this State is a fair, honorable and honest man, as 
1 know him to be, that if he would give a fair reading to the 
record of this office, to the whole of it, that he would be bound to 
and would reach the conclusion that no basis existed for removing 
this man from office. 

However much it may be said “ We do not impugn the char¬ 
acter of this man ”, still the very act, if you remove him from 
office, is a denial of that statement, and its refutation; and ymi 
send this man, honorable in every w 7 alk of life, faithful in the 
performance of every duty, bearing a record for integrity un¬ 
equalled even in this place; yet, if you deny him the right to be 
heard fully and completely, with all of his evidence, or if you 
fail to give full force and effect to the uncontradicted truth to be 
offered, then you send him forth disgraced; and it will be so ac¬ 
cepted by the people generally, and he will be discredited from 
this time henceforth. 

What does lie ask ? He asks from you simple justice and noth¬ 
ing more. That justice is his right; and that right you have no 
right to deny. So I respectfully ask at the hands of this Com¬ 
mittee, for such opportunity to present such testimony and wit¬ 
nesses as Mr. Kelsey shall be advised by his counsel shall be 
necessary, and that in their judgment shall be necessary, to 
establish the facts which 1 have asserted may be established. 

I thank the Committee for this hearing. 

The Chairman.—Judge Hatch, do I understand that the 
Superintendent is represented bv other counsel than yourself? 

Hr. Hatch.— Yes, sir. My associates are ex-Attorney-General 
Mayer and Mr. Ainsworth. 

The Chairman. Judge, do you wish to proceed further to-day ? 

Mr. Hatch.—Yes; if the Committee wishes. May I be ad¬ 
vised by the Committee as to its procedure, and if there is to be 
any limitation upon our rights to call witnesses ? 




Proceedings. 


71 


The Chairman.— I assume you will proceed under the resolu¬ 
tion adopted by the Committee. 

Mr. Hatch.— I do not quite understand the resolution, Mr. 
Chairman. 

The Chairman.— Mr. Kelsey or his counsel can make any state¬ 
ment that he or they may desire, and they may offer any deposi¬ 
tions or documents or papers or exhibits that they see fit in the 
matter. 

Mr. Hatch.— I suppose the Committee will issue a subpoena to 
those parties we take the depositions of ? 

The Chairman.-— I do not understand that the Committee has 
such power at this time. 

Judge, it seems to the Committee you can establish everything 
you expect to establish as set forth in your opening, by the Su¬ 
perintendent himself or by the records of the office, or by the ex- 
Attorney-General, who is here as one of the counsel for Mr. 
Kelsey in this case. 

Mr. Hatch.— Then I am sorry that the Committee misunder¬ 
stood me, because there are several things I am not able to estab¬ 
lish by either one of these gentlemen, which yet are very important 
to this defense. 

The Chairman.— Of course Mr. Kelsey, the Superintendent, 
must know the manner in which his office has been conducted dur¬ 
ing the past nine months, that is, during the time he has been 
Superintendent of Insurance. His statements will not be in any 
manner attacked, and it seems as though he knows more about it 
than any other man upon earth. 

How, I cannot conceive wherein you desire to go into the mat¬ 
ter by any other witness than Mr. Kelsey himself, as he knows 
it all, and the Committtee will not controvert or contradict him in 
any way. 

Mr. Hatch.— It is not a question of controverting on the part 
of the Committee. The Chairman of the Committee is a lawyer, 
and I have never understood that where I wanted to establish a 
fact which I had the right to establish, that I was limited to call¬ 
ing one witness to the fact, even though he were not controverted 
or contradicted. 

The Chairman.— But if the statement is not contradicted in 
any way by the Commission, what need is there for repetition ? 

Mr. Hatch.— What I desire to show is from the records and 
oral testimony of the members of the insurance companies and 







72 Senate Judiciary Committee. 

others and by the records in the insurance companies which are 
only available before this Committee upon its subpoena, to show 
that those facts and documents, when produced in connection 
with the oral testimony, will show that this Superintendent had 
mastered this whole situation. 

Now, I want that presented; that is the thing which is here 
before us. 

Senator McCarren.—Judge, what latitude do you desire in 
order to establish justification for the retention of the examiner 
and Mr. Hunter? 

Mr. Hatch.— I need the latitude necessary to offer the testi¬ 
mony of the officers connected with the fire insurance companies 
of the city of New York. I desire to show by them what Mr. 
Hunter did and what Mr. Vanderpoel did, and to show the re¬ 
cords in those offices with respect to it. That is the thing I wish 
to show. 

Senator McCarren.— Ho you also expect to controvert the 
statement of the Governor that Mr. Kelsey has shown a lack of 
initiative or force ? 

Mr. Hatch.—Yes, sir. I desire to meet those things. Those 
are the final summing up, as I am able to get it from this message. 

I want opportunity to offer proof to show on each one of those 
statements what the facts are, so that the Committee and the 
Senate ultimately will have before it what the fact is as we claim 
it to be; and everything short of that denies us our rights. 

The Chairman.— It seems to me, Judge, that you can show 
the fact with the records of your office and with the statements 
from the Superintendent. 

Mr. Hatch.— With all deference to the Chairman of this Com¬ 
mittee, I cannot do that to the extent that I desire for the pur¬ 
poses of a vindication of this man. 

Senator McCarren.— Judge, what sort of evidence do you pro¬ 
pose to submit to show that Mr. Kelsey was acting under the 
recommendation, so to speak, or the advice, of the late Governor 
Higgins ? ' 

Mr. Hatch.— That is necessarily limited to Mr. Kelsey him* 
. self and to the evidence of Attorney-General Mayer, upon that 
branch of it, as to the advice he received from him and the con¬ 
sultations continuously had with him; to that extent the oppor¬ 
tunity to give proof is sufficient. Beyond that, and as to the 
others, that opportunity will not develop what the facts are. 




PROCEEDINGS. 


73 


Senator Page.— Do I understand that you expect to show by 
these insurance officials that Mr. Hunter and Mr. Vanderpoel 
were efficient and zealous and diligent during the period that was 
covered by the investigation of the Armstrong Committee? 

Mr. Hatch.— As to the fire insurance, yes, sir. 

Senator Page.— Do you want to ^go back into the time prior 

Mr. Hatch.— Ho, sir ; I want to show the fire situation as it 
existed under Mr. Kelsey, on account of the San Francisco dis¬ 
aster which occurred; but the situation in respect to the fire in¬ 
surance companies was not acute until Mr. Kelsey took office. 

Senator Page.—-As I understand you do not wish to contro¬ 
vert any of the facts set forth in the Governor’s recommendations, 
but you wish to show that while those facts might be true, that 
in other things Mr. Kelsey was zealous and active and showed 
capacity. 

Mr. Hatch.— I do not controvert the fact set forth by the Gov¬ 
ernor that Mr. Vanderpoel made the report which he did; but 
I go into the question as to whether Mr. Kelsey was justified 
in retaining the services of those two men. 

Senator Armstrong.— Cannot Mr. Kelsey state every fact that 
operated on his mind in reaching the conclusion to retain these 
men ? : 

-i, „r l 

Mr. Hatch.— Yes, sir. 

Senator Armstrong.— Is not that all the latitude necessary to 
enable the Committee to determine what the facts were that were 
before Mr. Kelsey when he reached that conclusion ? 

Mr. Hatch.— I think not. I want to show the concrete fact 
that these men went to these insurance companies; and that by 
reason of their keeping track of these insurance companies, and 
following them up, and from the information they got in the city 
of Hew York from the officers of those insurance companies, they 
should know all about it. 

The Chairman.— That was done under direction of the Super¬ 
intendent of Insurance? 

Mr. Hatch.— Yes, sir; it was done by these men; and he was 
in office although he was not there. 

Senator Armstrong.— How can facts which he did not know 
have operated upon his mind in relation to retaining these men 
in office? 

Mr. Hatch.— I have assumed the charge was that we were not 
justified in retaining these two men. How the course of the 



74 


Senate Judiciary Committee. 


business was this: That lie communicated with them, and they 
went about getting the information, that Mr. Kelsey communi¬ 
cated with them over the telephone, constantly, many times a day, 
the information was communicated from them to him. 

How I want to show from independent sources which cannot 
he controverted and which will be accepted by .the people-, all these 
facts; because I am here to vindicate this man and his character 
if I can; and I want to show by proof which will be accepted by 
the people, that they made this examination and that they gathered 
these facts, and that those were the results; and that Mr. Kelsey 
knew it, and then I ask this Committee from all that testimony, 
for them to find and say that he was justified in the retention of 
these men and in acting upon the advice of Governor Higgins. 

Senator Armstrong.— I do not suppose there is a member of 
this Committee who would not accept Mr. Kelsey’s statement of 
the facts with entire confidence. 

Senator Hinman.— But would that apply to the public gen¬ 
erally ? Does he not stand in the light of an interested witness ? 

Senator Armstrong.— Supposing there were a multitude of 
facts shown by these gentlemen, some of them within Mr. Kelsey’s 
knowledge, and some of them not; would we not be dealing with 
what might he called a collateral matter ? If this proceeding be 
not misunderstood, we have before us a recommendation of the 
Governor to dispose of. We have not before us the trial of an 
issue, at least we have not yet assumed it was so. It is a com¬ 
paratively narrow question, and it is almost so entirely personal 
to Mr. Kelsey that a crowd of witnesses, a crowd of facts, might 
nevertheless be entirely irrelevant to the real inquiry we have 
to make. 

Mr. Hatch.— Do I understand the Senator to say there are 
no charges against Mr. Kelsey here? 

Senator Armstrong.— I say there are no formal issues created. 
We are not trying an issue in the sense in which an-issue was 
tried in the two cases to which you referred. 

Senator McCarren.— Judge, what do you understand the real 
inquiry of this Committee to be ? 

Mr. Hatch.— I understand it to be either one of two things 
that they have power to do: If the Senate wants to do it the 
Senate has the power to remove this man without cause or reason. 
And if that power is exercised I want it to appear to the people 
of this State that the Senate has so exercised it. 



Proceedings. 


75 


Now the other is this: That the things contained in this mes¬ 
sage are either nothing, or they are charges. If they are charges 
then we have the right to meet them by all the proof which we 
seek to offer which is competent and legitimate to the inquiry; 
and then the Senate acts not upon the bare exercise of its power 
as a power, but upon the finding on the question of facts as to 
whether or not the charges are sustained. 

Senator McCarren.— Do you understand it to he a mere ex¬ 
pression of opinion on the part of the Governor that Mr. Kelsey 
is unfit, or that the Committee is embarked on an inquiry which 
should be pursued ? 

Mr. Hatch.— I have construed this, and supposed the Com¬ 
mittee had so construed it, as an inquiry into charges found in 
the message; but with the distinction which had been drawn which 
I confess I had in part never been able to see, that the charges 
remain in the message and are not formulated outside of it. Of 
course if these things were written out and we had a specification 
upon that branch of it as to the charges, then the widest latitude 
should be given to Mr. Kelsey to disprove them, whatever they 
might be. 

Senator Page — That is the purpose of my inquiry: whether 
you wish by these witnesses to controvert the points set forth in 
the message or whether you admit these and wish to show that in 
other things than those Mr. Kelsey was diligent and efficient ? 

Mr. Hatch.— I thought you referred to the specific report of 
Mr. Vanderpoel. The other statements I did and still deny 
that they exist. 

Senator Page.— The question I asked as to Mr. Vanderpoel 
or Mr. Hunter was whether you wished to show they were derelict 
in their duty in not certifying to the condition existing before 
the Armstrong investigation; that they had been mistaken, and 
the Armstrong Committee was wrong, and you wanted us to try 
that; or whether because since then they had investigated the 
fire insurance companies that that should be an answer to any 
dereliction of duty on their part in the past? 

Mr. Hatch.— No. What I desire to show is that under the 
circumstances here these two men were in office, one had been in 
office thirty-three years and the other had been in office ten years. 
They were skilled employees; and I wanted to show why they 
should be retained in the Department after the investigation made 
by the Armstrong Committee; that such determination is based 


76 


Senate Judiciary CommiT'TEE. 


upon many considerations, one of which was the inability to 
properly fill their places with other men or to obtain the skilled 
employees. The other was the fact that their services were needed. 
Taking the whole situation together it was our determination and 
the determination or conclusion reached by Governor Higgins 
that they should be retained for the present. Therefore I say 
we cannot be charged with failure to recognize a just public 
demand, and dismiss those people under the circumstances. 

Senator Smith.— Judge, do I understand what you desire to 
show is that notwithstanding what may have been found to be 
the facts by the Armstrong Investigation Committee, when Mr. 
Kelsey took office a condition of affairs existed which would have 
made it perilous to dispose of those men’s services until these 
matters were cleared up and disposed of ? 

Mr. Hatch.— Exactly; and that the results which flowed from 
that opinion on his part justified the conclusion which he reached. 

Senator Armstrong.— Judge Hatch, I do not know what the 
Committee will determine, but speaking for myself I would say 
that Mr. Kelsey knows every fact and consideration that operated 
upon his mind in the conduct of this Department, and every fact 
that can be alleged as a reason for any of his conduct. He knows 
the results which were accomplished. I do not see how his state¬ 
ment of it can be magnified by the testimony of any witness, be¬ 
cause any witness who magnified it would have to state a fact 
outside of Mr. Kelsey’s knowledge. 

Mr. Kelsey can state any fact in his knowledge which operated 
on him in reaching a conclusion; and that cannot be added to 
by the testimony of any witness. 

Mr. Hatch.— Senator, I am unfortunate in making myself 
understood, or else I utterly disagree with you. 

The purpose of this testimony is this: To show an existing 
condition which was perilous to the fire insurance institutions 
in this State, and which called for action by the Superintendent 
of Insurance; that that condition was in existence- 

Senator Armstrong.— Do you want to show a condition which 
existed in fire insurance matters ? 

Mr. Hatch.— Yes, sir. 

Senator Armstrong.— Well, Mr. Kelsey knows that. 

Mr. Hatch.—- That may be. 

Senator Armstrong.— He knows that existed at the time he 
took office. 





Proceedings. 


77 

Mr. Hatch.— Does the Senator wish to catechise me ? If so let 
me continue my statement to the end; for I object to that kind of a 
cross-examination. 

Senator Armstrong.— All right, Judge, proceed in your own 
way. 

Mr. Hatch.— I say that was a perilous situation which ex¬ 
isted at that time; and that Mr. Hunter by reason of his familiar¬ 
ity with the fire insurance people whose offices were in the city 
of New \ ork, of which Mr. Kelsey was not, that because of that 
Mr. Vanderpoel was able to visit those offices and obtain the 
information, and that information which he obtained he com¬ 
municated to Mr. Kelsey day after day and continuously. 

Now it is not legal evidence what information Mr. Vanderpoel 
obtained from the insurance officers; nor what they communicated 
to him. When it reaches Mr. Kelsey’s hands it is hearsay testi¬ 
mony, solely and purely. 

Now Mr. Vanderpoel is discredited by this report in the Gov¬ 
ernor’s message, • and the question here was whether being so 
discredited and under the circumstances then existing whether 
that officer should be retained. 

Now I want to show it was good judgment on the part of Mr. 
Kelsey which was exercised in retaining him, and I want the 
Senate to so find. That we can show by him and by the insur¬ 
ance officials. Mr. Kelsey knows nothing about it. 

Senator Armstrong.— You want to show the things that Mr. 
Vanderpoel, for example, did and which thus came to Mr. Kelsey’s 
knowledge; and that the ultimate situation was whether it was a 
matter of good judgment on the part of Mr. Kelsey to retain 
them. 

Mr. Hatch.— No; hut whether he should he removed. 

Senator Armstrong.— The question of whether or not Mr. Kel¬ 
sey exercised good judgment depends on the facts Mr. Kelsey had 
before him on which to base his judgment. Nothing can be stated 
outside of Mr. Kelsey’s knowledge which is relevant to that* fact. 
If the issue resolves itself into this, that Mr. Vanderpoel having 
been found faithless should he excused from that because of other 
good work he did, and that was outside Mr. Kelsey’s knowledge, 
it is still irrelevant. 

Mr. Hatch.— It is not a question of excuses. That does not 
enter into it. 

Senator Armstrong.— If there he a question to be determined 
it is whether the retention of these men under the circumstances, 




18 


Senate Judiciaky Committee. 


which Mr. Kelsey knew or became aware of, was an exercise of 
a wise discretion. That depends on what Mr. Kelsey knew or 
became aware of. We are not going to question the hearsay 
evidence in any statement Mr. Kelsey may make because it does 
not fall strictly within legal proof; but Mr. Kelsey will have an 
opportunity to state wliat was told to him and what these men 
said others said to them, as they are facts which operated on his 
mind. 

Mr. Hatch.— The Senator knows Mr. Kelsey and will take his 
statement, because he knows that he is an honest man; but the 
people of this State haven’t that knowledge. 

Senator Armstrong.— I have never heard it questioned. 

Senator McCarren.— Do you understand, Judge, from what 
Senator Armstrong says, that if Mr. Kelsey will positively state 
that in the administration of the Insurance Department since he 
has been at the head of it that in his opinion it was necessary 
to conserve the interests of the Department that Mr. Kelsey retain 
Mr. Hunter and Mr. Vanderpoel, that that statement made by Mr. 
Kelsey would assure Senator Armstrong that there is no justifica¬ 
tion for the attitude of the Governor in referring to that fact as 
evidence that Mr. Kelsey did not properly perform his duties ? 

Senator Armstrong.— I say that any statement of fact which 
Mr. Kelsey makes I should accept with entire confidence in its 
truthfulness, and any opinion Mr. Kelsey offers upon those facts 
would have great weight with me because of my respect for him. 

Senator McCarren.— I simply want to have it understood that 
I speak for myself, and that if I am to be confined to the testi¬ 
mony of Mr. Kelsey, and if Mr. Kelsey assures me that the best 
interests of the Insurance Department required that he should 
at least temporarily retain the sendees of Mr. Vanderpoel and 
Mr. Hunter, that that would go a long way in my estimation 
toward removing the gravamen of the charge. 

Senator Armstrong.— Judge, may I suggest that you go ahead 
with Mr. Kelsey’s statement or Judge Mayer’s statement or any¬ 
one else until this rises as a practical question so we can more 
readily determine whether the process of the Committee will be 
necessary. 

Mr. Hatch.— I desire to be advised as to the course of pro¬ 
cedure to be followed by the Committee in that regard so that I 
may make my own arrangement accord with it. 

The Chairman.— I think, Judge Hatch, you had better pro¬ 
ceed under the resolution of the Committee in your own way. 




Proceedings. 


79 


Mr. Hatch.— So construed, I desire on behalf of Mr. Kelsey to 
protest against it and to protest against it as earnestly as I 
can, from this shutting off and strangling his defense. 

The Chairman.— Mr. Kelsey and his counsel are before this 
Committee by the courtesy of the Committee, and it seems as 
though you should proceed without entering any protest, because 
of the courtesy which has been extended to you. 

Mr. Hatch.—If it is here regarded as a matter of courtesy 
simply, and not as a matter of right, and that Mr. Kelsey is 
only granted by courtesy this appearance here to-day, then I do 
not care to remain. But I claim for him the right to present 
the facts. 

Senator Page.— Of course, Judge, it is your privilege to re¬ 
main or not. 

Senator Armstrong.— Let me say that all hearings before Com¬ 
mittees of the Senate are strictly by courtesy of the Legislature. 
The Legislature has power to dispose of matters coming before it 
without seeking information. But long custom has established 
the method of giving everybody an opportunity to speak in order 
that the Committee may be advised and thus advise the Senate. 
Undoubtedly the basis, however, of the privilege is one of courtesy 
and not of right. 

Senator Allds.— Last week we thrashed this out, each member 
expressing his own views in Committee session as to what at that 
time struck us as the right procedure to follow; but .that was 
determined with the light we then had. Judge Hatch had not 
at that time appeared before the Committee or presented the facts 
which he holds as to the proper course of procedure. How as the 
hearing is about to open he makes a request of the Committee. 
Having thus expressed his views at full length and having advised 
the Committee of his view of a proper course of procedure, isn’t 
it but fair that the Committee should take up the request which 
the Judge has made and determine whether it should be granted? 
Here we are sitting apart from each other and unable to reach 
any conclusion by conferring, and I would suggest that before 
any determination is reached that the Judge and Mr. Kelsey are 
entitled to have their views passed upon by the Committee. 

Senator Page.— Is that necessary when Mr. Kelsey is here and 
the question cannot practically come up until there is some ques¬ 
tion raised as to other witnesses? We can go on this afternoon 
and hear Mr. Kelsey, and then when we get through the Com- 



80 


Senate Judiciary Committee. 


/ 


mittee can take this into consideration, and the Judge can then 
depart or remain as he sees fit. But it seems to me it would he 
better for the Judge to go on with Mr. Kelsey, and we could then 
take this matter up after our adjournment; and I do not see that 

that will prejudice his rights in any way. 

Mr. Hatch — When I made the request I was not feeling well; 
I was quite ill last night and I am suffering to-day, and if the 
Committee could see its way to take up this matter and dispose 
of it, postponing the hearing for the present, it would greatly 
oblige me in view of my physical condition at this time. I would 
not be able to go on and examine this witness now. 

Senator Armstrong.— Do you mean you intend to examine Mr, 
Kelsey orally ? 

Mr. Hatch.— Oh, yes. 

Senator Armstrong.— Then the question arises as a practical 
one right away: whether under the resolution which we have 
adopted, and as I understand it, it is practically limited to state¬ 
ments of counsel, personal statements of Mr. Kelsey, depositions 
and documents. So we are now face to face with the practical 
situation, and we had better retire and determine that first, as 
Senator Allds has suggested.' 

Mr. Mayer.— It says, u To hear Mr. Kelsey and his counsel.” 

Senator Armstrong.— Mr. Kelsey could state orally and by 
deposition every fact he can wish to state, and we need not wait 
for question and answer and cross-examination. We have no 
desire for that as we would accept any statement Mr. Kelsey made. 

Mr. Mayer.— May I make this suggestion: I think you would 
find it to he a physical impossibility and highly unsatisfactory to 
have a statement, for this reason, if for none other; in the course 
of this examination it will he necessary for Mr. Kelsey to show 
and to illustrate the work he has done, and that requires the intro¬ 
duction at certain points of documentary evidence. How while 
that can theoretically he done by statements I do not think it 
would he a satisfactory way to present the facts to the Commit¬ 
tee. Judge Hatch and the other counsel concluded that the 
words “ Hear Mr. Kelsey and his counsel ” meant to hear them. 

The Chairman.— The Committee will now retire for the pur¬ 
pose of considering the question which has been raised by Mr. 
Kelsey’s counsel. 

(Committee retires at 4:30 p. m.) 

(The Committee returns to the Senate Chamber at 5:30 p. m.) 



Proceedings. 


81 


The Chairman.— Judge Hatch, the determination of the Com¬ 
mittee is to hear Superintendent Kelsey by questions and answers 
if you so desire. How, I suppose you wish to take an adjourn¬ 
ment until to-morrow afternoon. 

Mr. Hatch.— Yes, sir. 

The Chairman.— Will two o’clock suit you ? 

Mr. Hatch.— Yes, sir. 

The Chairman.— Then we will continue until six o’clock to¬ 
morrow afternoon. 

Mr. Hatch.— I suppose so, at least until such time as the 
Committee pleases. 

The Chairman.— And then will you be ready to proceed on 
Monday ? — we could give you a full day on Monday. 

Mr. Hatch.— I wish the Committee would leave the second 
adjournment until we meet to-morrow. 

The Chairman.— Very well. There is nothing further at this 
time ? r 

Mr. Hatch.— Ho, sir. 

The Chairman.— There being no further business, the Com¬ 
mittee stands adjourned until to-morrow, March 14, 1907, at 
two o’clock, to meet in the Senate Chamber. 


Proceedings before the Judiciary Committee on Message of the 
Governor Relating to the Superintendent of Insurance. 

Senate Chamber, Capitol, 

Albany, March 21, 1907. 

Proceedings before the Judiciary Committee on Message of the 
Governor Relating to the Superintendent of Insurance. 

Present.— Senators Davis (Chairman, presiding), Arm¬ 
strong, Paines, Smith, Page, McCarren, Taylor, Cohalan, 
Cobb, Allds, Hinman and Grattan of the Committee, 

And Judge Hatch, Hon. Julius M. Mayer and Mr. Ains¬ 
worth, Counsel for Superintendent Kelsey, and Mr. Kelsey. 

The Chairman.— The Committee will now come to order. 

Mr. Hatch.— I desire to ask the Committee to swear Mr. Kelsey. 
The Chairman.—We will take the Superintendent’s statement 
without the formality of an oath. I do not suppose the Com¬ 
mittee has any desire to swear Mr. Kelsey. 



82 Senate Judiciary Committee. 

Mr. Hatch.—We object very seriously to the statement that 
Mr. Kelsey’s statement should not be taken under oath. These 
proceedings instituted by the Governor and the examination had 
of Mr. Kelsey by the Governor — in those an oath was admin¬ 
istered. We have been quite impressed with the necessity of it 
not only because Mr. Kelsey desires any statement he shall make 
shall have the sanction of an oatlq but we are also desirous of it as 
matter of practical necessity. In a statement made before the 
Committee at the last meeting very serious doubts and reflections 
were cast upon the statement which it was claimed the counsel 
would make and for that reason those would be accentuated if his 
statements did not have attached to them the solemnity of an 
oath. So if the Committee has not now the power to administer 
an oath, of course it remains with the Senate to confer that power 
upon the Committee; but we must insist seriously and earnestly 
here that the statements which shall be made before the Commit¬ 
tee, whether they are such statements as fall from the lips of Mr. 
Kelsey or from the lips of other witnesses, shall have the sanction 
of an oath attached to them so that they may be made as im¬ 
pressive as possible. 

The Chairman.— Of course, the first resolution of the Com¬ 
mittee would authorize Mr. Kelsey to file a deposition which wo ul d 
be under oath if he so desired and wished to proceed in that way. 

Mr. Hatch.— The Committee is possessed already of my views 
upon that subject and the colloquy which followed that statement; 
and we insist here upon the administration of an oath in some 
form. 

Senator Haines.— Mr. Chairman, I regret exceedingly that I 
have been compelled to be absent from the Committee during the 
past three weeks, and also have been unable to be present at the 
proceedings taken by the Committee in the matter of this investi¬ 
gation. I want to say, Mr. Chairman, that when the message from 
the Governor,. with the formulated charges against Mr. Kelsey 
were placed before the Senate, I moved at once to refer the matter 
to the Judiciary Committee for a report — have you the original 
motion, Mr. Chairman? (The Chairman hands paper to Senator 
Haines) — in these words: “ Resolved, That the message of the 
Governor and the accompanying papers be printed and referred 
to the Judiciary Committee with instructions to report at the 
earliest time practicable what disposition should be made of the 
matter.” 





Address of Senator Raines. 


83 


When I made that motion I had in mind two things — they 
were the two precedents that were before the Senate in regard 
to such proceedings as this. First, the precedent in the Ellis 
case, the case of the Superintendent of Banks, Mr. Ellis, which 
was referred to the Committee, and by the Committee, on its 
resolution, ordered referred to the Committee on Banks for an in¬ 
vestigation. The second was the insurance investigation of Mr. 
Smyth, which was sent to the Judicfary Committee in exactly 
the same wording I have in that resolution except so far as it 
provides for the printing of the statements made by the Governor. 

I had in mind when that reference was made, Mr. Chairman, 
that the Committee would formulate an order of procedure based 
on one or the other of these precedents. Why that has not been 
done I do not know, unless it may be possible that it was deemed 
that the charges in this case coming from a source so high — not 
having originated outside of the Governor’s office as they did in 
the other two cases — rendered it unnecessary that the Committee 
should go further than simply to inquire among themselves as to 
what was thought to be best, and to make a report to the Senate 
on that inquiry. I cannot, however, conclude, Mr. Chairman, that 
that was really the sentiment of the Committee. 

The origin of the charges gives them an importance that was 
never given to the charges that were made against Mr. Smyth or 
Mr. Ellis. These are the Governor’s charges. The duty of the 
Senate, as must be conceded, is of equal importance with the duty 
of the Governor; and if it was important that the Governor for 
his own information and the information of the public should put 
the only witness he chose to call under oath, it seems to me, Mr. 
Chairman, that it is perfectly proper, and that we are only fol¬ 
lowing precedent, and a very good precedent too, when in the 
place of rumor and talk and wild assertion, we put a witness 
whose testimony shall or should have weight with this Senate, and 
must be given to the Senate, also under oath. So there shall be 
neither rumor nor wild assertions to be considered in the dispo¬ 
sition of this most important case. 

This seems to me, Mr. Chairman, to be one of the most important 
matters that has ever been placed before the Senate of the State 
of New York, whether as affecting the great interests concerned, 
as affecting the Governor of this State, or affecting the man whom 
the Senate is called upon to remove from the high and important 
office of Superintendent of Insurance. 


84 


Senate Judiciary Committee. 


Kow, Mr. Chairman, it seems to me that having been admitted 
here as it has and as I suppose it would be, that we have got no 
authority to administer an oath as the matter stands now, that we 
can simply take the statement of Mr. Kelsey or anybody else that 
the Committee may see fit to permit to appear before it and give 
statements; that this Senate or this Committee is not in a position 
which the dignity of the situation demands it should occupy. 

Now, Mr. Chairman, I .do not think I need or ought just now 
in public to argue this question further. It must be apparent to 
the members of the Committee, as it has been announced, it is ap¬ 
parent to the Superintendent of Insurance and those who represent 
him that there should be some order of procedure for this Com¬ 
mittee to follow. There is no provision even now by which we 
can give to the members of the Senate the testimony that shall 
be taken here. We can administer no oaths, and I think it better 
instead of having an argument here further before this Committee, 
after having_made this simple statement of the situation, that I 
should ask that the Judiciary Committee go into executive session. 
I therefore move, Mr. Chairman, that the Judiciary Committee 
go into executive session. 

The Chairman.— Gentlemen, you have heard the motion — 

Senator Armstrong.— Mr. Chairman, before that motion is put 
I should like to make a statement. I am sorry that the Senator’s 
sickness and the fact that he only arrived in the Capitol a few 
minutes ago has prevented some of us from having more con¬ 
versation with him about this than otherwise we would have 
gladly had. 

While his apparent confusion is natural because of his sickness 
and absence, the proceedings so far taken by the Committee mem¬ 
bers may not be subject to criticism. I only rise to explain it 
because the motion which has formulated our procedure for the 
purpose of this present hearing was proposed by me and adopted 
by the Committee. The resolution which Senator Kaines offered 
in the Senate is as he has read it: That the matter should be 
referred to the Judiciary Committee with instructions to report 
at the earliest time practicable what disposition should be made of 
the matter. It was quite proper for the Judiciary Committee 
thereupon to resolve that it would hear Mr. Keisey and his 
counsel with any depositions and documents which he should file 
before proceeding further with this hearing. That the Committee 
resolved to do. It was an eminently proper and regular proceeding 


Adbrrss of Senator Armstrong. 


85 


for the Committee to take, and designed undoubtedly to develop 
whether or not a more formal procedure should be adopted than 
that, or whether after such a hearing the Committee chose to re¬ 
port the matter back with recommendations for further proceed¬ 
ings or a more formal procedure or for final disposition by the 
Senate. 

It had been referred to the Judiciary Committee for advice. 
The Judiciary Committee is seeking information which will en¬ 
able it to give that advice to the Senate. It is ready to pro¬ 
ceed under that procedure; and it is ready to hear Mr. Kelsey 
and his counsel and receive any documents and depositions which 
he may desire to file. 

I have no objection to the request of the Senator for an execu¬ 
tive session, the request made by the Temporary President, but 
I want to disabuse his mind and those who might think similarly, 
of the opinion that the Committee has not proceeded in proper 
form so far, or that its proceedings have been at all irregular. 
Kow, then, having so far resolved that we will hear Mr. Kelsey 
and his counsel, if he chooses, and receive such documents and 
depositions as he chooses to file, it goes almost without saying 
that it is not necessary, whether we have the power or not .to 
administer it, that the hearing should be under the sanctity of 
an oath. We desire to hear Mr. Kelsey upon this matter which 
has been referred to the Judiciary Committee, and as was sug¬ 
gested at the last hearing, so far as I know the Committee does not 
purpose to controvert Mr. Kelsey’s statements in matters of fact. 
We who know him will have the utmost confidence, as I have 
already stated, in any facts he may state without the oath. We 
desire to hear Mr. Kelsey, and his counsel said they preferred to 
have his examination take the form of question and answer, and 
the Committee decided that there was no objection to that if that 
was preferable, that they would take his examination in that form 
as it was preferable to him and his counsel; and we have met 
to-day for the purpose of hearing Mr. Kelsey and we understand 
that the hearing may take the form which may seem most con¬ 
venient to them, and the forimbest adapted to save the time of 
Mr. Kelsey and his counsel as well as save the time of the Com¬ 
mittee. Whether Mr. Kelsey’s statement, is to be put in in the 
narrative form, or by question and answer, we are here to-day 
ready to proceed and take up that procedure. 

This matter of the recommendation of the removal of the 
Superintendent of Insurance was presented to the Legislature 


86 


Senate Judiciary Committee. 


by the Governor on February 20th, on the 20th of February, 
1007, and it is just one month since then, but the deaths which 
have occurred and the sickness of the Temporary President as 
well as other matters which have occurred made this necessary 
delay, and it was agreed that it was eminently important that we 
should proceed now to hear Mr. Kelsey if he has anything to say, 
and that the Committee should then address itself seriously to 
the business which was referred to it. 

And I would like to say that I do not want any impression 
created that the Committee has made any mistake or miscon¬ 
ceived the purpose for which this matter was referred to it, or 
that it intends to do anything but proceed with it in a just and 
orderly fashion. I merely wish to contend that the Committee 
is proceeding in a just and orderly way to acquire the knowledge 
it should have. The Temporary President requests that the Com¬ 
mittee go into executive session. I see no objection to that course 
being taken. I do see very marked objection to not proceeding 
with this matter in such a way that w T e can report to the Senate 
what disjiosition should be made of the matter, without prejudg¬ 
ing what that disposition must be. But we must arm ourselves 
with the necessary information as to what should be done, and 
report back to the Senate — that goes without saying — and what 
ever time we waste now in further discussion of this matter will 
be simply a waste of our time for we will get no more informa¬ 
tion and be no better able to report progress to the Senate on the 
matter which has been referred to us. 

Senator Smith.— May I be permitted to ask a question of the 
Senator for my own information ? 

Senator Armstrong.— Certainly. 

Senator Smith.— Does the Senator wish it to be understood 
that we are now in session in order to make such inquiry as may 
be necessary to determine which form of procedure will be neces- 
k, ai , or v hether our object is to inquire into the merits of the 
case ? 

Senator Armstrong.— We are ^ here under order of the Com¬ 
mittee, to hear Mr. Kelsey and his counsel, and to receive what¬ 
ever statements or documents or depositions they may have to file 
with us. The purpose of the resolution referring this to the 
Committee is this: Instructions to report at the earliest time 

practicable what disposition should be made of the matter.” 




Proceedings. 


87 


Senator Smith.— But whether it is as to the procedure or as 
to the merits it does not specify ? 

Senator Armstrong.— Ho. 

Senator Smith.— What does the Senator think about that ? 

Senator Armstrong.— The Senator does not know; and he 
does not wish to prejudge this matter, but he does insist that any 
further delays are a mere waste of time and that nothing can be 
gained by not proceeding with the order of business laid out for 
to-day, and that is, to hear Mr. Kelsey in such form as is agree¬ 
able to him and his counsel, and to receive anv documents or 
depositions they deem it wise to submit. 

Senator Raines.— I do not suppose it is necessary to argue this 
motion. It might be well to decide at once without further argu¬ 
ment. But 1 want to call attention of the Committee to one thing, 
and that is the wording of the resolution as I introduced it, and 
the wording of the resolution in the Smyth proceeding; and to 
see how wide the divergence is in the action of the Committee be¬ 
tween the precedent in the Smyth proceeding and the action by 
the Committee here. This was the resolution: — “ Mr. Jacob 
offered the following resolution: Resolved, that the message of 
His Excellency the Governor be referred to the Judiciary Com¬ 
mittee with instructions to report at the earliest time practicable 
the method of procedure to be had in relation thereto. Mr. 
Kennedy moved to amend the resolution by striking out the words 
‘ the method of procedure to be had in relation thereto ? and in¬ 
serting in lieu thereof ‘ what disposition should be made of the 
matter/ ” The President put the question on the amendment of 
Mr. Kennedy and it w r as decided in the affirmative. The Presi¬ 
dent then put the question on the resolution as amended and it 
was decided in the affirmative. 

So we see that the resolution I have here, that I introduced, 
and which was passed, and which went to the Judiciary Com¬ 
mittee, was exactly the resolution upon which the proceedings 
were formulated in the Smyth case, which was after a hearing by 
counsel and for the swearing of witnesses and so on. 

How I must say that it is a little surprise to me that with that 
being the only precedent for action that the cases should so 
widely differ in the action before the Committee. 

Row, Mr. Chairman, I think I will ask that my motion for an 
executive session of the Committee be put, because I have no 
desire whatever to delay this, and I think if we can decide this, 



Senate Judiciary Committee* 

which I think we can do even so as to go on this afternoon with 
orderly procedure, that we shall not delay but shall advance 
toward a conclusion of this matter much quicker than we will by 
going as yon please, as the matter now stands. 

The Chairman.— The question now before the Committee is 
on the motion of Senator Raines that we go into executive session. 
Are you ready for the question ? All in favor say aye, all op 
posed, no — 

Senator Armstrong.— Mr. Chairman, I shall vote against that. 

The Chairman.— Call the roll. 

The result of the call was as follows: Senator Allds (no re¬ 
sponse) ; Senator Cobb — Aye; Senator Cohalan — No; Senator 
Grady (not present) ; Senator Grattan (no response); Senator 
Hinman — Aye; Senator McCarren — Aye; Senator Page 
Aye; Senator Raines — Aye; Senator Smith — Aye; Senator 
Taylor — No. 

The Chairman.— The motion is carried. 

The Committee retired from the Senate Chamber to the Senate 
library for a meeting in executive session at 2 :45 p. m. 

The Committee returned to the Senate Chamber at 4:20 and 
proceedings were resumed as follows: 

The Chairman.— Judge Hatch, the Committee is ready to pro¬ 
ceed, and if you desire we will swear Mr. Kelsey. 

Mr. Hatch.— Swear Mr. Kelsey. 

Senator Armstrong.— Mr. Chairman, I desire to dissent from 
the proposition to swear Mr. Kelsey. 

The situation as it stands is this: Mr. Kelsey, after the recom¬ 
mendation of the Governor was made to the Senate, wrote to the 
Chairman of the Committee that before any action was taken 
thereon he requested the privilege or the opportunity to be heard. 
Thereafter the Senate referred this matter to the Committee to 
report at the earliest time practicable what disposition should be 
made of the matter. The Committee adopted the resolution that 
Mr. Kelsey be notified that he would be heard with his counsel 
and such documents or depositions as he chose to submit on 
Wednesday last. The proceeding so far is entirely regular. 

There is some doubt which has been expressed as to whether 
the Committee has power at present to administer an oath. I 





Testimony of Me. Kelsey. 


89 


have no doubt of the Committee’s power to administer an oath; 
hut there is no reason why Mr. Kelsey, whose statement of facts 
will not be controverted here, should not make his statement, 
which will be practically ex parte of any reasons which exist why 
further action should not be taken by the Committee, and'I see no 
reason why an oath should be administered. I see a manifest 
impropriety against administering an oath to Mr. Kelsey under 
these circumstances, and I desire very plainly to have my dissent 
noted. 

The Chairman administered the oath to Mr. Kelsey. 

Otto Kelsey, being duly sworn, testified as follows: 

Direct examination by Mr. Hatch: 

Q. What is your full name? A. Otto Kelsey. 

Q. Where do you reside ? A. Geneseo, Livingston county. 

Q. And you have resided there how long? A. Continuously 
since 1876. The family had lived there for a generation or two 
prior to that. 

Q. What is your age, Mr. Kelsey? A. Fifty-four. 

Q. What has been your occupation ? A. Lawyer. 

Q. You are the Superintendent of Insurance of this State? 
A. I am. 

Q. Have you ever held any other public position? A. State 
Comptroller. 

Q. Anything else ? A. And member of the Legislature. 

Q. When were you a member of the Legislature? A. From 
January 1, 1894, until December 31, 1902. 

Mr. Hatch.—I ask permission of the Committee to remain 
seated during the examination. 

The Chairman.— Certainly, Judge. 

The Witness.— I do not know whether I speak so as to be 
heard, Mr. Chairman. 

The Chairman.— Can you hear, gentlemen (addressing the 
Committee) ? The answer to which question was yes. 

Q. And were you such member of the Legislature continuously 
during that period of time? A. Continuously. 

Q. What positions did you hold in the Legislature? A. Mem¬ 
ber of various committees. 

Q. Hame them? A. I do not know that I could. I have been 
chairman of a number of committees during that time Codes, 




00 


Senate Judiciary Committee. 


Judiciary, Cities; and I was “second” on Ways and Means for 
a number of years, and a member of the Committee on Rules for 
a number of years. 

Q. Were you ever chairman of the Insurance Committee? 
A. No. 

Q. Or on that committee? A. No. 

Q. Not during your service? A. Not at all. 

Q. You stated 'you were Comptroller of the State. When 
was that ? A. I was by appointment from November 12, I think, 
1903, until the next year, when I was elected and served from 
January 1st until last May; that is served a year and more. 

Q. By whom were you appointed ? A. Governor Odell. 

Q. And you succeeded whom? A. Nathan L. Miller, who re¬ 
signed. I had been Deputy Comptroller under Nathan L. Miller. 

Q. And you were promoted? A. I was appointed when Mr. 
Miller resigned; I was appointed to succeed him. 

Q. And subsequently were you elected Comptroller ? A. I was. 

Q. In what year? A. 1904. 

Q. And you remained Comptroller for how long? A. From 
the 1st of January following, 1905, until May 17, 1906. 

Q. 1906. In 1906 what occurred? A. I was appointed 
Superintendent of Insurance. 

Q. By whom ? A. Governor Higgins. 

Q. Will you state the circumstances attending that appoint¬ 
ment? A. Do you mean the date? 

Q. No, not the date, but the circumstances surrounding it. 
Were you an applicant for the position ? A. I was not. Governor 
Higgins sent for me, whether by messenger or through the tele¬ 
phone, I don't remember. I went to the Executive Chamber. 

Q. Do you recollect what date that was? A. First of May. 

Q. 1906? A. It was the day preceding my name being sent 
in, that is the way I fix the date, and I was nominated and 
confirmed on the second. 

Q. Will you state the conversation you had with Governor Hig¬ 
gins ? A. I cannot state it all. 

Q. State in substance what you recollect of it? A. He stated 
he had sent for me to say he proposed to send my name in as 
Superintendent of Insurance. I told him that I regretted it very 
much; that I hoped he could find some better candidate; and he 
asked why, or something to that effect, and I stated that I was 
entirely satisfied to serve as Comptroller; the work was congenial 


( 


Testimony of Mr. Kelsey. 91 

to ine and it kept me in touch with the men I had known for 
years, and was a continuation of the same kind of work. He then 
said it was a difficult matter, as he put it, to find a $25,000 man to 
fill a $7,000 place; that he knew I had a wide acquaintance and 
that he believed the people who knew me had confidence in me, 
and he thought it was my duty to take the place for the sake of the 
administration and the service I could render. 

I told him it looked to me as if a man who took the office of 
Superintendent of Insurance under those conditions simply 
courted destruction; that it would be impossible to serve without 
incurring vehement criticism, and if a man made any mistakes 
he would get very little credit for his efforts. He said he did not 
look at it in that way, and he believed I could keep my head under 
difficulties, that the matter would be straightened out under the 
new statutes and he hoped and urged that I would consent to an 
acceptance. He spoke also of the obligation to the public as well 
as to the administration, and he spoke of the benefit of putting 
into force the new statutes and things of that kind. 

Q. What were the circumstances to which you referred, Mr. 
Kelsey, at the time this conversation was had with Governor Hig¬ 
gins ? A. It was the feeling of excitement which had been created 
over insurance matters and the struggle which was imminent in 
the life insurance companies, and the new statutes that were at 
that time said to revolutionize the business. 

Q. And that had been the product of the investigation of the 
Armstrong Committee? A. The preceding investigation. 

Q. Did you have any further conversation with Governor Hig¬ 
gins at that time? A. That conversation altogether, and the other 
lasted thirty minutes. 

Q. What do you mean by that one and the other ? A. What 
I have stated — I could not give it all connectedly. I said to him 
finally that under the circumstances and a sense of my obligation 
to him, and my duty to the public, if he thought I ought to 
take it he could send in my name. He thanked me and I went 
out. That was the close of it. 

Q. Did he send in your name to the Senate ? A. He sent in my 

name the next day. 

Q. Do you recall what action the Senate took upon it ? A. It 
was confirmed. 

Q. Do you know whether it was referred to a committee?. A. 
I understand it was not. Senator Tully made the motion to con- 


92 


Senate Judiciary Committee. 


firm, and it was confirmed, when presented. I never looked up 
the record. 

Q. Do you know whether or not there were any dissenting 
votes on that occasion? A. I was told there were none; or rather 
that all the Senators voted in favor of it. 

Q. How soon after that time did you enter upon your duties ? 
A. It was the 15th day — the 15th or the 17th. There was a 
large amount of work which I tried to clear up in the Comp¬ 
troller’s office, and the Governor’s counsel thought I should qualify 
within the fifteen days, and I did so. 

Q. Did you resign from the office of Comptroller ? A. Re¬ 
signed, yes, sir. 

Q. And entered upon your duties as Superintendent of In¬ 
surance? A. I did. 

Q. Do you recollect at what time the new law of which you have 
spoken was enacted ? A. Well, there were several dates in the 
latter part of April that the final vote was taken on them, and 
then they were signed. I think there was one in March. 

Q. When you entered upon the performance of your duties as 
Superintendent of Insurance that law was in force? A. Yes, sir. 

Q. Had been passed ? A. Yes, sir. The Legislature had ad¬ 
journed; it adjourned on the 3d of May. Whether they had all 
been signed then I do not recall now. 

Q. So that your administration of the Insurance Department 
was under this new law ? A. So far as it was in operation. 

Q. Will you give to the Committee generally the details of your 
Department ? A. Do you mean the organization ? 

Q. Yes. A. There is the Superintendent — I will give the 
Albany office first ? 

Q. Yes. A. The Second Deputy- 

Q. What is his name ? A. Henry D. Appleton, who has charge 
under the Superintendent, of the general administration of the 
office. 

Q. How long has he been there ? A. My recollection is twenty- 
three years. 

Q. And what positions did he occupy in the Department? 
A. Through various clerkships he was promoted during different 
years up until the present. He has been Second Deputy, I think, 
for a number of years. 

Q. And do you know what position he held when he first entered 
the Department? A. I have heard it said it was a small clerk¬ 
ship. 




Testimony of Mr. Keesey. 


93 


Q. Y ou understand lie has been promoted through the various 
grades? A. Yes, sir. 

Q. Until he reached his present position ? A. I am so in¬ 
formed. 

Q. Did you say how long he had held the position of Second 
Deputy. A. I am not sure of the number of years. 

Q. A considerable number of years? A. Yes, sir. 

Q. What are his duties? A. The general charge of the De¬ 
partment under the Superintendent. 

Q. Of the office in Albany ? A. Of the various bureaus of 
the office in Albany, and the Yew York office which is controlled 
from the Albany office. 

Q. What is your next officer in point of rank ? A. The next 
is the Chief Clerk who is acting as Third Deputy. 

Q. What is his name ? A. Mr. Behan. 

Q. How long has he been in the office? A. I think about 
the same time, twenty years. 

Q. Do you know his history, as to the positions he has held 
in the Department? A. Hot distinctly, except from common 
report he has been through different clerkships until he reached 
his present position. 

Q. What was his position and the position of Mr. Appleton at 
the time you went there? — the same as now? A. Yo, he was 
then Chief Clerk. 

Q. Who was ? A. Mr. Behan was Chief Clerk. There had 
been a Third Deputy. My predecessor, Superintendent Hendricks, 
had a lawyer as his Third Deputy. I dispensed with the Third 
Deputy and increased Mr. Behan’s salary and made him acting 
Third Deputy and Chief Clerk, and he took charge of the work 
formerly done by the Third Deputy and so I gave him more salary, 
the work having increased very much. 

Q. What are his special duties ? A. In the absence of Mr. 
Appleton he assists as Deputy. His position is connected with 
the business assessment and the fraternal, the general corre¬ 
spondence in relation to those companies. 

Q. And the co-operative ? A. That is a business assessment. 

Q. Any other duties assigned to him outside of those you have 
mentioned ? A. He had charge of what we call the general office, 
the clerks under him, in connection with the Second Deputy, they 
co-operate to a large extent. 

Q. You have what you call in your Department an actuarial 
room? A. Yes, sir. 


04 


Senate Judiciary Committee. 


Q. How is that made up ? A. There is a chief actuary, Mr. 
Paterson, who has two assistants; there are about a dozen ac¬ 
tuarial clerks, or men who make the computations as to the value 
of policies, etc. 

Q. Who has charge of that work ? A. Mr. Paterson. 

Q. And how long has Mr. Paterson been with the Department? 
A. I think he has been there over forty years. 

Q. And is that— A. He is still a very vigorous and com¬ 
petent man. 

Q. Does that require special knowledge and skill, to fill that 
position? A. It does; the actuarial science is a specialty. 

Q. Can you describe it to this Committee, generally? A. I 
could not, so they would understand it. It is the mathematical 
work connected with the life insurance business, the valuation 
of policies and the various computations on surrenders, and all 
the calculations that go to make up the business. 

Q. In connection with his duties, has your attention been 
called to it, that is, do you examine them, these papers ? A. 1 
keep in touch with his work; he gives me the technical details 
and I determine what shall be done. 

Q. And I omitted to ask you, had you had any experience in 
the insurance business before you went into this Department? 
A. I had not, except in a loose general way I had been on the 
Ways and Means Committee for years, and they had been be¬ 
fore us many times in relation to their Department, and I knew 
roughly the scheme of organization of the Department, but not 
as to the details of the insurance business. 

Q. What is the work of the other men ? A. They assist Mr. 
Paterson. He has a first and second assistant, actuarial clerks 
and a stenographer. 

Q. And are their duties technical or clerical ? A. Well, the 
clerks, the actuarial clerks, their work is more clerical. They 
make the computations, but they have the details and they make 
them from the matter furnished to them by the chief actuary. 
They make up the valuations of the policies principally. 

Q. But that matter is made up by Mr. Paterson and you ex¬ 
amine it ? A. Yes, sir. Well, the computations I am jiot going 
over or verifying, or anything of that kind, but when companies 
want work done I know of it and the matter is explained by them. 

Q. I do not mean the computations, but I mean the principle 
upon which the computations ’are made ? A. No, I do not under- 


95 


Testimony of Mr. Kelsey. 

stand the mathematical side of it; he is the expert of the De¬ 
partment. 

Q. And that work is intrusted to Mr. Paterson ? A. Of neces- 
sity; yes, sir. 

Q. A ou have in your Department a statistics room ? A. Yes, 
sir. 

Q. And what does that department cover, what force? A. 
A chief statistician, at present he has two assistants, and it will 
be necessary to add three or four at least at .the present session. 

Q. That is there is need for addition in that department? A. 
Yes, sir. The new statute requires such extended returns from 
insurance companies, \yith the abstracts and the tabulations, and 
that will require an increase in the clerical force of men, the 
amount of which cannot be determined now. 

Q. How many are employed there now ? A. There is the chief 
statistician, Mr. Crippen, Mr. Dack and Mr. Willis, and Mr. Phil¬ 
lips, our expert proof reader, who occupies part of the same 
room, and I assume assists some. 

Q. How long has the chief been in the Department ? A. A 
number of years; I do not know how many. 

Q. And the others ? A. Mr. Dack has been there, I could 
not say how many years it is, but a dozen or more I think. Simply 
from report, I have not verified it. 

Q. What are the principal duties in connection with that De¬ 
partment ? A. The financial statements are turned over to the 
statistician and he audits them and makes the abstracts and 
tabulations that appear in the Annual Report. 

Q. Of what company? A. Of all the life insurance com¬ 
panies, and I think the fire companies go to him also. It is the 
financial statement of all the insurance companies; that includes 
the casualty and all the others, and the fraternals. 

Q. And marine insurance in connection with that ? A. Yes, 
fire and fire-marine. 

Q. The guarantee companies, are they included in that ? A. 
Yes, sir; title, credit and guarantee*- 

Q. And the business assessment companies? A. Yes, sir. 

Q. They are all there? A. All the reports filed there go to 
the statistician. 

Q. Do you know the number of corporations over which that 
department in its work covers ? A. There are over four hundred 
reports of companies in that department. 


96 


Senate Judiciary Committee. 


i 


Q. What are the other duties in connection with that? Is 
there any audit of annual statements? A. I stated that when 
I was speaking before; they are all audited by the statistician 
and it requires frequently voluminous correspondence; various 
items or conditions need explanation or correction, the put¬ 
ting in of assets that are not to be admitted and frequently a 
number of letters are written back and forth before the account 
is properly stated and filed. 

Q. Is there anything to do with the subject of reinsurance? 
A. Yes;, the items they claim in making up their statement. 
Where they claim credits in reinsurance it is all carefully gone 

over and audited. , 

Q. Is there any examination with respect to the securities? 

A. Yes, sir. 

Q. What is that? A. As to the verification of it—as to the 
values, the market quotations, the amount they claim credit for,— 
whether they are accurate or not; all of that is gone through and 
corrected. 

Q. In that department ? A. Yes. 

Q. So, as I understand it, that department embraces all of the 
statements with respect to the subjects you have mentioned? A. 
It does. 

Q. Where is the impairment of the capital of insurance com¬ 
panies determined — in what department ? A. That is done there. 

Q. And it is determined in this- A. In this auditing. 

Q. What connection do you have actually and in fact with the 
auditing performed in that department ? A. Everything that oc¬ 
curs there goes over my desk; the correspondence, letters asking 
for corrections or explanations or calling their attention to errors, 
are brought to me or explained to me, and I sign the letter, or have 
corrections made in it, if I am dissatisfied with it. 

Q. Is that true of all of the items of which you have spoken ? 
A. Yes. Of course, a great many items go through without at¬ 
tracting my attention; but anything unusual the expert calls my 
attention to. 

Q. I omitted to ask you in the beginning what hours in the 
day do you devote to the discharge of your duties as Superin¬ 
tendent of Insurance? A. I am there on an average*from nine 
o’clock until half past six, with a half or three-quarters of an hour 
for lunch. 

Q. Now, that service has- A. The regular office hours are 

from 9 to 5. 








Testimony of Mr. Kelsey. 


97 


Q. And the service — the hours that you have devoted to the 
Department, does that cover the entire period of your incumbency ? 
A. I think it does. There have been exceptional reasons for it 
owing to the conditions. 

Q. Have you since entering upon the discharge of the duties 
of your office taken any vacation ? A. I have not. As a matter 
of fact, I have not, from the time I took the office, been out of 
touch by either wire or ’phone for twenty-four hours with my De¬ 
partment ; and there have hardly been twenty-four hours that I 
have not been communicated with when out of the city. 

Q. And as to physical distance, what is the farthest you have 
been away from the office during the period of your incumbency ? 
A. I think, to my home in the village of Geneseo. 

Q. And then for how long a time, the longest time ? A. I may 
have been further away on one trip. I went to Washington. I 
was out of Hew York about twelve hours going there and back — 
if that is further; I don’t know whether it is or not. 

Q. So practically, you have been in continuous discharge of 
the duties of your office each day and during the hours that you 
have mentioned ? A. I have. 

Q. And have you ever exceeded that limit ? A. Repeatedly. 
I have been there evenings during -times of special activity until 
after eleven o’clock. 

Q. And how frequently has that been? A. I don’t know that 
I could tell you; possibly twenty times; possibly more. 

Q. Will you state to the Committee the securities that are 
deposited by the corporations with you? A. Well, of the various 
kinds deposited by the various insurance companies we hold in 
the vault something over twenty-six millions. 

Q. Of dollars ? A. Of dollars. 

Q. And what are they mainly ? A. They are mainly in State 
and governmental securities. All of them are the deposits that 
are required by statute. 

Q. Government, State and Municipal bonds? A. Yes. They 
also have the right, some of them, of depositing mortgage 
securities. 

Q. How frequently are those securities examined ? A. Well, 
we require them to send a representative from each company that 
has a deposit there and check up the securities once a year, I 
think, at least; so that there is somebody coming there frequently 
— every day or so. 


98 


Senate Judiciary Committee. 


Q. That is, there is no particular day in the year when that 

examination takes place? A. IN’o. 

Q. It relates to the fiscal year that the company has been doing 
business with the Department ? A. Yes. Well, I would not be 
sure whether there is any part of the year that they are more apt 
to be frequently made or not; I know they come at all times. 

Q. And who makes those examinations ? A. A representative 
of the Department goes over the list of the securities and checks 
them up with the representative of the company, and takes his 
receipt, showing that they are there and intact, and there are cases 
where they come to take the interest coupons, I think. 

Q. Are there any changes made from time to time in these 
securities ? A. Very frequently. 

Q. State the circumstances? A. Well, under the statute they 
can — the companies can exchange the securities. They fre¬ 
quently want to withdraw securities and substitute others. I am 
not familiar with all the red tape, but the papers have to be made 
out showing the action of the Board of Directors and the proper 
resolutions properly certified, and they make an application and 
there is considerable formula to go through before the change 
can be made. 

Q. What are your duties in connection with that exchange, and 
what do you do? A. We assign the bonds when the proceedings 
are all right. 

Q. You pass upon the sufficiency of the security? A. Yes, 
just as with the original security. 

Q. In that connection, what do you determine ? A. Whether 
we can exchange them. They w T rite to us that they wish to ex¬ 
change such and such securities on deposit, for such others as 
they propose; and the Department determines or I determine 
whether it can be permitted. 

Q. That means you determine whether or not these securities 
offered in exchange conform to the law? A. Exactly. 

Q. Do you make any examination of that subject to determine 
the question ? A.. We do. 

Q. Can you tell me how many millions of dollars are exchanged 
yearly ? A. I could not offhand; I don’t recall. 

. Q- Can you approximate it, Mr. Kelsey — thousands or mil¬ 
lions? A. Oh, it would be millions, T think. 

Q. Of dollars? A. Yes. 

Q. Bet us see. I think I omitted to ask you do you execute 
a bond ? A. I do. 



Testimony of Mr. Kersey. 


99 


Q. In what sum? A. $25,000. 

Q. And that bond, I suppose, you have executed? A. I did; 
that is a part of the qualification. 

Q. And it has been approved ? A. Yes. 

Q. Y on spoke about real estate security that was deposited at 
sometimes. Is that mortgage security ? A. Yes. 

Q. And who makes those examinations ? A. Well, where do 
you mean ? 

%J 

Q. I mean, when such security is deposited with the Depart¬ 
ment ? A. They are made through the Department by appraisers 
-—• an investigation. 

Q. Do you examine these? A. I examine the reports that 
come in. - * 

Q. All of them? A. Yes; practically all of that security is 
submitted to me personally. 

Q. And you ultimately pass upon the sufficiency of those securi¬ 
ties ? A. I do. 

Q. And as to whether they meet the requirements of the law? 
A. Yes, whether the value is properly stated; that is, whether it 
is more than the two-thirds, and things of that kind. 

Q. Can you tell us the amount of those securities that you 
examine in the course of a year ? A. I could not. 

Q. Can you, approximately ? A. Only as I did before; it must 
be several millions. 

Q. And all those pass through your hands and are subject to 
your judgment? A. They are. 

Q. Have you described all the branches of the Albany office ? 
A. Ho. We have the main office where the Assistant Chief Clerk 
and the bookkeepers and general clerks, the stenographer and as¬ 
sistants are — four or five in that room; there is a cashier and 
two stenographers in the office with the Chief Clerk and the 
Acting Third Deputy. 

Q. That is what you would call your clerical force, as I under¬ 
stand ? A. Yes. I think there are a little over'thirty in the 
force here in the Department. 

Q. That is, including all classes? A. Yes. 

Q. Where is the Hew York office? A. Ho. 11 Broadway. 

Q. And who is in charge of that? A. At present Mr. Gordon, 
one of the old examiners, is in charge. It ordinarily has been 
under the Deputy Superintendent. 

Q. Who was in charge when you entered upon the discharge 
of the duties of your office ? A. Kobert H. Hunter. 



100 


Senate Judiciary Committee. 


Q. And wliat was liis position at that time ? A. He was First 
Deputy. 

Q. What were his duties ? A. He had charge and direction 

of the executive work of the Hew York office. 

Q. And what force was under him there ? A. The examining 
force, aside from the office force of a stenographer and a clerk. 
The examiners are located in Hew York. 

Q. What do you mean by examiners ? A. They are the em¬ 
ployees who, under the Chief Examiner, make the examinations 
of the insurance companies. 

Q. Of all the classes of insurance companies ? A. All classes. 
Q. Fire and life? A. Fire, life, marine, casualty, general 
credit, guaranty, fraternal and busindfcs assessment. 

Q. How many of these examiners did you say were there ? 
A. I think there are about eighteen at present. The new statute 
authorized an increase up to twenty. 

Q. And who was the Chief Examiner? A. Mr. Yanderpoel. 
Q. That was at the time you entered upon the duties of your 
office ? A. Yes. 

Q. Have there been any appointed since you entered upon the 
duties of your office — have any examiners been appointed ? 
A. Yes. 

Q. How many ? A. Three new ones have been appointed under 
the civil service list, last fall or winter. 

Q. And by you ? A. By me. 

Q. Do you know how long the examiners had been in this 
office — in the Department ? A. Most of them are of long service. 

Q. How many years, about ? A. Well, they vary from twenty 
years to seven or eight. 

Q. T ou said Mr. V anderpoel was the Chief Examiner ? 
A. ^ Yes. 

Q. Do you know how long he had been connected with the De¬ 
partment ? A. He had been there twenty-three years consecu- 
tively. There had been a time when he was absent for three 
or four, years, and there were ten years back of that. He had 
been thirty-three years in the Department altogether. 

Q. And is he at present connected with the Department 2 A 
He is not. 

Q. When did he leave? A. I think it is about the first of 

February that his resignation took effect; it may have been a little 
earlier. 


Testimony of Me. Kelsey. 


101 


Q. The first of last February? A. Yes. 

Q. Do you know what his occupation is at the present time ? 
A. I understand he is Vice-President of the Eagle Fire Insurance 
Company. 

Q. You said Mr. Hunter was the First Deputy? A. Yes. 

Q. And is he still in the Department ? A. lie is not. 

Q. When did he leave? A. Ilis resignation took effect the 
first of March, I think, or the last of February. 

Q. And he had filed h is resignation when ? A. In — I think 
it was the 8th of October his resignation was sent in, and I w r as 
not ready to accept it and he renewed it again in January, Jan¬ 
uary or February, I don't remember which. 

Q. So the first resignation made by him was in October ? A. 
Yes, the actual tender of the resignation. There was a talk with 
him earlier than that in which he stated he wished to withdraw 
and was ready to at any time. 

e- t/ 

Q. And that was when ? A. My recollection would be it was 
in August, but I would not be sure of the date; it was a conver¬ 
sation. 

Q. Will you state to the Committee wliat the duties are of the 
examiners ? A. Well, when an appointment is given — 

Q. State first what was the duty of the Chief Examiner, Mr. 
Vanderpoel ? A. He had general charge of all the examinations. 
When an appointment would be made for the examination of a 
company, issued to him, he would select the force for the particular 
examination, wdiatever class or character, and go into the offices 
of the company and conduct the examination with them. 

Q. That examination was directed by whom ? A. I directed 
the examination from Albany always. 

Q. The direction given in Albany was carried out by the force 
in Yew York ? A. In Yew York. Mr. Hunter had the executive 
charge of keeping the time and knowing where the men were and 
the ordinary transaction of the business, other than the technical 
part of it. 

Q. Do you recollect whether there was any provision of law 
with respect to these examinations; that is, I mean as to au¬ 
thorizing the examination — giving the authority for it ? A. 
Why, the statute requires us to make the examinations. 

Q. And what statute is that? A. Well, under the amended 
statute it must be as often as once in three years. Under the 
former statute it was at the discretion of the superintendent. 





102 


Senate Judiciary Committee. 


Q. You have examined all of these statutes, Mr. Kelsey, ha\e 
you ? A. I have. 

Q. And made yourself thoroughly familiar with them? A. 
Well, as familiar as I could from time to time. I did not sit 

down and master it all at one time. 

Q. But from time to time as matters have arisen in the office ? 

A. It is continuously,— day by day. 

Q. And thus you have familiarized yourself with those statutes ? 
A. With the details of any special work that was to be done. 

Q. Are there such occasions as a special examination ? A. 
Frequently. 

Q. And for what purpose ? A. Sometimes it is for verifying 
an increase of capital or surplus or a decrease of capital, or a capi¬ 
tal statement when they wish to make an application to some 
other State for admission, or for the verification of securities — a 
great many things of that character. 

Q. Speaking now since you have assumed the. duties of the 
office have such examinations as you have described been held? 
A. They have. 

Q. Will you state whether or not you have made a personal ex¬ 
amination of the results of such examinations and kept track of 
them during the course of the examinations ? A. I have. Every 
report comes to me and is gone over in detail by me before it 
passes out of the Department or before any action is taken upon it. 

Q. Will you state generally to the Committee, beginning with 
the order for the examination first, generally, and then specific¬ 
ally just what you have done in connection with it? A. Well, 
first is the determination as to where 'we will make the examina¬ 
tion. Then an appointment is issued and the examiner is notified. 

Q. And who determines that ? A. I do. 

Q. Xow r , go on. A. He arranges his force and goes into the 
office and makes the examination; goes through the books of the 
company, all of the details, usually verifying them, checking them 
up with the preceding annual statement, making that the basis for 
getting at the assets and liabilities, and any unusual transactions 
in the business of the company; and in order to arrive at the 
amount of the assets it involves going through the securities held 
of all kinds, and the liabilities the same — going through the 
vouchers. 

Q. And -• A. The report is made up when completed and 

forwarded to the office at Albany. There it is gone over by me, 





Testimony of Me. Keilsey. 


103 


and if there is anything we wish to have additional information 
upon, we order it; if not, we send a copy of the report to the com¬ 
pany. Under the statute, they have the right to ask for a hearing 
before it is placed on tile. They are notified and sometimes they 
come up and have a hearing. Sometimes, on rare occasions, it is 
put on file and made public without a hearing. 

Q. And when there are hearings on those applications, who 
hears them? A. I do'. 

Q. And who reaches the final conclusion ? A. I do. They 
usually appear with counsel, and frequently several officers of the 
company and their lawyers. 

Q. And how frequently does that happen ? A. In the great 
majority of reports the companies ask for a hearing, for some 
criticism — sometimes important and sometimes not very im¬ 
portant — that they want to correct. 

Q. But whether important or otherwise, you make the deter¬ 
mination in connection with it ? A. Invariably. 

Q. Did you devote during the period of your incumbency — 
give any personal attention to the examinations as they were be¬ 
ing conducted prior to the delivery to you of the reports ? A. 
Why, I always do. There has not been an examination that I have 
not had reason to make frequent inquiries of the chief examiner 
as to the progress and as to the conditions he was finding. 

Q. And have you been to Yew York for that purpose? A. I 
am there probably once a week, and whatever is going on is re¬ 
ported to me by the man in charge there — in this instance, Mr, 
Gordon, acting deputy. 

Q. How frequently do you have telephonic communication with 
(he office in Yew York with respect to these matters ? A. I was 
about to say daily. Possibly it is not daily in regard to any par¬ 
ticular examination, but we are in daily communication with that 
office, and if there is an examination pending and there is any 
reason to make a report upon it or to make an inquiry about it, it 
is done by ’phone. 

Q. And those communications are quite frequent ? A. They 
are. 

Q. IIow many fire insurance companies have been examined 
during your incumbency of this office ? A. I don’t know that I 
could tell you without reference to memoranda. 

Q. Can you approximate it ? A. I do not believe I could with 
any accuracy. 






104 


Senate Judiciary Committee. 


Q. Have you had any occasion during this time to examine 
one company more than once, during the period of your incum¬ 
bency ? A. Yes. Owing to the San Francisco tire we have had 
occasion to make inquiry and to make repeated examinations of 
some of the companies. 

Q. How many times has any single company been examined ? 
A. I think the most was the Dutchess. I think that was three 
times, besides the weekly statements that for a few months I re¬ 
quired to be sent in verified by the officers. 

Q. What do you mean by weekly statements ? A. Well, in 
addition to our examination, they were liquidating or attempting 
to liquidate, and they furnished me a verified statement of all 
claims, and the amount of decrease by reason of settlement or 
adjustment. 

Q. So that the examinations to which your attention has been 
directed come in the general course and special examinations of 
which you speak ? A. Yes. 

Q. These weekly statements, who directed that they should be 
made? A. I did. 

Q. And you based your direction upon your examination ? A. 
Yes, upon the reports. 

Q. Are there any appraisers connected with the Hew York 
office ? A. There are. 

Q. How many ? A. There are two. I don’t know that you would 
call them connected with the Hew York office. They do not live 
there. They are two appraisers that do most of the appraising 
of property in and about Hew York city. 

Q. And how many are there in all connected with the Depart¬ 
ment ? A. There have been two others; I think I have only em¬ 
ployed them once. The appraisers are paid for the time actually 
employed serving. i here are tv r o others, Mr. Mo wry and Mr. 
Cowie, that I only recollect employing once for some up-State 
appraisal. 

Q. They reside at Syracuse ? A. One of them does. I don't 
remember where the other is. Mr. Cowie is there. 

Q. And their appraisement is with regard to what ? A. They 
appiaise the real estate holdings or the mortgaged property. That 
is where an insurance company holds mortgage security they go 
and appi aise the property in order that we may determine whether 
the liens are in accordance with the statute — whether they are 
safe, whether the property is worth so much, or whether it does not 
exceed the amount that may be loaned. 


Testimony of Mr. Kelsey. 


105 


Q. And those are the securities to which you have referred 
that are allowed to be deposited ? A. Those* are not all. They 
are required to keep a certain amount with us — $200,000', but 
they may have in other assets several times that. 

Q. Which they hold ? A. Yes, or can deposit elsewhere. 

Q. And what are you expected to require as to those securities ? 
A. Their examination is to determine accurately the return of 
their assets. 

Q. That is, I suppose, they put a valuation upon the securities 
they hold ? A. They do. 

Q. And then you make an examination for the purpose of 
determining whether that examination is correct ? A. Precisely. 

Q. And that involves mortgage securities to what extent ? A. I 
could not state; it involves millions. 

Q. Millions of dollars ? A. Yes; sometimes there are a great 
many millions involved in one company. 

Q. Are those securities limited to the State of New York? 
A. No. 

Q. Where are they held, securities of that character, which you 
are required to examine ? A. The property is frequently located 
in various States. We frequently send appraisers to another 
State, if the State is nearby. The practice with regard to what 
we call foreign States — distant States — is to send to the Depart¬ 
ment of that State, and they appoint an appraiser who takes our 
blanks and makes the appraisal and makes the return properly 
certified; a kind of comity between State Departments. 

Q. How frequently are these appraisals made ? A. There are 
some appraisals being made most of the time. 

Q. And the properties ? A. Wherever there is an examination 
there is very apt to be an appraisal with it. 

Q. And the purpose is to see not only that the securities that are 
required by law to be deposited with the Department are correct 
as to value, but also those securities held by the company ? A. The 
entire holdings. 

Q. Which represent security to the policy-holders ? A. Every¬ 
thing included in the assets. 

Q. State to the Committee the duties of Mr. Hunter in con¬ 
nection— what his duties were in the New York office. A. As 
I have stated, he was the executive officer; he was the man that 
met the officers of the companies; he was the man who kept track 
of the examiners, the business part of it, where they were, their 




106 


Senate Judiciary Committee. 


pay, the appraisers; received the appointments and issued the 
schedules and took care generally of the business of the office. 
He had nothing to do with the technical investigation of the books 
of the companies. 

Q. Did he make any reports to you ? A. Frequently. 

Q. And what did you do with those reports ? A. Why, I deter¬ 
mine what action the Department will take. He took no action 
down there affecting the business of the Department without in¬ 
structions from Albany. 

Q. And without instructions from Albany from whom ? A. 
From me. 

Q. You gave him instructions continuously? A. Practically 
every day; that is, anything that would come up, any inquiry 
made, he would call on the phone stating that such and such things 
were requested and asking what the Department wanted done, 
and I would tell him what to do. 

Q. And then did you keep in touch with him during the exam¬ 
ination while it was in progress ? A. Always. 

Q. As well as passing upon its final result? A. Yes. 

Q. And that was continued? A. It is a part of the daily 
business just as between our different bureaus here. Th"e tele¬ 
phone makes it possible to conduct the Yew York office practically 
as we do the others here. 

Q. I believe you have stated that when you assumed office you 
were confronted with this new statute ? A. I had it, yes. 

Q. And what did you do in connection with that statute after 
you entered upon your duties; I mean, with respect to possessing 
yourself of knowledge of the requirements of the duties of your 
Department? A. Why, I studied the statute carefully. It be- 
came necessary immediately in regard to the business as it came up. 

Q. Well, and to determine what your duties were under it? 
A. Certainly. It was new to me to a large extent, and I spent a 
great deal of time in going over the statute, not only in connection 
with the business as it would come up, but separately and at 
my room. 

Q. And you devoted yourself to a general understanding of that 
law ? A. I had no other purpose. I had a good deal of pride in 
trying to master it and I set about it seriously. 

Q. And you think you have practically mastered it, do you not 
Mr. Kelsey ? A. I think I have. " ’ 

Q. Do you recall what was the first important matter that came 
up under the operation of the new law, with respect — A. Well, • 


Testimony of Me, Kelsey. 


107 


the first thing that was unusual or beyond the routine was the life 
insurance-—the filing of lists, as I recollect it. 

Q. And what particular item did that relate to? A. Do you 
mean section ? 

Q. Yes. A. Yinety-four. 

Q. Do you recall that your attention was called to the duplicate 
list of policy-holders in the domestic life insurance companies ? 
A. Yes, it was called, because the statute required their filing by 
the 18th of July, and the officers of the companies were imme¬ 
diately inquiring as to the preparation of the list. The big com¬ 
panies like the Mutual and the Yew York Life, with over 900,000 
names supposed to be in one, and 700,000 in the other perhaps — 
they said it was almost an impossible task to prepare them; they 
wanted to know as to the details of the list. 

Q. What did you do ? A. I had conferences with the counsel 
representing the companies and with the companies’ officers. 

Q. With how many of those counsel, do you recall ? A. Well, 
Mr. McIntosh was up for the Yew York Life, and there was 
some younger man with him on one occasion. 

Q. And who from the others ? A. Well, Mr. Allen from the 
Mutual, I remember being there and there was correspondence 
with Judge McKeen, of the Yew York Mutual. 

Q. Of the Mutual ? A. Yes. 

Q. What did you do with respect to those hearings and the 
final determination upon the particular questions you passed upon ? 
A. Why, we discussed the matter very thoroughly. 

Q. How long a time did the discussion occupy? A. I do not 
believe I could say about that; it would be at different times. It 
was settled pretty soon as to the matter of alphabetizing and the 
fixing of general agencies and boundary districts and the method 
that would be followed in making up the lists and-t 

Q. What do you mean by alphabetizing? A. Well, one of the 
companies, I think, had the list already alphabetized. Alpha¬ 
betized means taking them alphabetically; of the other companies 
there would be five or six holding elections which had not carried 
it out that far. The rule I made was that arranging them in 
alphabetical order would be sufficient. That is, the surnames 
alphabetically arranged. 

Q. How many names were there ? A. I don’t know how many 
were finally filed. The estimates in starting was that there 
were — i think it was over 800,000. I know they repeatedly 





108 


Senate Judiciary Committee. 


talked of 900,000 in the New York Life, and somewhere between 
600,000 and 700,000 in the Mutual. Then the Equitable filed, 
and there was the Security Mutual and the Germania. It seems 
to me there were two or three others. I here were contests in only 
two. 

Q. Now the next step in the proceeding. This law required a 
form of standard policy, did it not? A. A es. 

Q. What section of the law was that? A. One hundred 
and one. 

Q. And that provided what ? A. It provided for four forms of 
standard policy; it also provided for the Superintendent modify¬ 
ing the forms as printed, in case of necessity, before they were 
promulgated, which should be done by the first of October. 

Q. Nineteen hundred and six? A. Nineteen hundred and six. 

Q. And this was what date that this question arose ? A. Well, 
it came early in my experience. The companies were anxious as 
to their business — how it was to be affected out of and in New 
York, and inquiries were frequent, and the matter was taken up 
with the various organizations of actuaries — the American So¬ 
ciety, I think they call it — and the actuaries of the principal com¬ 
panies and parties interested in fixing the final forms. It seemed 
to have been recognized that the forms as printed needed to be 
modified somewhat in particulars. 

Q. Do you recollect what the four standard forms were that were 
required ? A. Yes. 

Q. State them. A. The ordinary life, what they call limited 
payment life, endowment and term. 

Q. And the next one ? A. The term — that makes the four. 

Q. Did the statute prescribe the form for each of these ? A. 
It did. 

Q. Do you recollect what power in that connection was con¬ 
ferred upon the Superintendent ? A. Well, it w T as to modify 
them, if in his judgment it was necessary or proper or advisable 
to do so. 

Q. And within what period was he so authorized to exercise his 
judgment and discretion ? A. Prior to the first day of October. 
I he statute directs that they shall be promulgated on that date, 
if such changes were to be made. 

Q. And if you had not exercised your judgment and discretion 
and that day had passed, then the others became the standard 
form ? A. Yes. They were to be used after the first of Janu- 





Testimony of Mr. Keilsey. 


109 


ary, but this was to enable the companies to get the printing 
and other literature and everything arranged and adjusted for it. 

Q. Do you know how many forms of policies there had been 
prior thereto issued by the insurance companies ? A. My experts 
have told me that there were over three hundred. That is what I 
have learned generally from conversations with people who knew. 

Q. Does your own knowledge from examination verify that ? 
A. I should think so; yes. 

Q. And they were issued by the various companies in this 
State ? A. Yes, and out. 

Q. Will you state — there is such a society as the Actuarial 
Society of America ? A. There is. 

Q. And who is its president ? A. Well- 

Q. Mr. Weeks? A. Yes, Mr. Weeks. 

Q. When did you first take up this subject of the proposed 
forms of the amended policies ? A. I could not give the date, 
but it was along in the summer. 

Q. What was the occasion of it; who submitted your first form ? 
A. I think the Actuarial Society. 

Q. And through its president, Mr. Weeks ? A. Through its 
president. 

Q. Will you describe what the Actuarial Society is? A. I 
understand it is a membership of practically all the actuaries, 
professionally- 

Q. Of different States? A. Yes, of the different life insur¬ 
ance companies and some that are independent. 

Q. In that society are there represented the different insur¬ 
ance departments of the several States ? A. Well, I don’t know 
as to their membership; the actuaries are from different States 
and, I think, the departments. 

Q. Does any member from your Department attend their meet¬ 
ings ? A. I don’t know that I have ever heard that. I think 
Mr. Paterson is a member—he must be. 

Q. Do you know who — Mr. Weeks, you say — did he present 
more than one form of amended policy ? A. I presume he did. 
I don’t remember distinctly. I know there were a great many 
forms presented from various sources; nearly every company in 
the Actuarial Society and a great many individuals who had forms 
that they believed to be absolutely necessary. 

Q. Do you recall whether or not the Equitable Life presented 
any? A. I remember they did. 








110 


Senate Judiciary Committee. 


Q. Through whom did they present them ? A. Mr. Van Cise. 

Q. Do yon remember whether Messrs. Alexander & Green, as 
counsel for the Equitable Life presented any forms? A. They 
wrote communications; yes. 

Q. To whom? A. To me. 

Q. In relation to what ? A. The form of policy. 

Q. Was there any argument had before you? A. Well, we 
called them conferences, I think. 

Q. Well, describe what they were so as to give the Committee 
an idea ? A. An appointment would be made and these profes¬ 
sional gentlemen who came would bring their various forms and we 
would sit down and talk it over. They would suggest certain 
language that ought to he inserted, and would give their reasons 
why the language as printed would work to the injury of the 
company or would be misleading or would result differently than 
the Legislature had probably intended. My actuary would go 
through the forms carefully, comparing the language and marking 
all changes suggested, and after the conference he and I would 
sit down and we would go over it in detail. 

Q. You were present at all of those conferences ? A. I was at 
every one of them, hut not all the time they were talking, per¬ 
haps. Eor instance, they would be in the actuaries’ room or in 
Mr. Paterson’s room some of the time, and I would he in some 
other room. 

Q. How many conferences do you recollect were had ? A. I 
remember four or five, and I should think the chances were that 
there were double that. 

Q. Do you know whether there were any printed briefs sub¬ 
mitted in connection with these conferences ? A. There were. 

Q. And they were submitted by whom? A. The Actuarial 
Society submitted a brief. It seems to me there were about a 
dozen of the companies which united in submitting one brief, and 
then separate companies submitted separate forms for their par¬ 
ticular use, and then there were letters from actuaries making 
suggestions entirely outside of life insurance companies. 

Q. How, what did you do with these briefs that were sub¬ 
mitted ? A. I had the forms brought in, with the corrections as 
made, and I took the briefs and the letters and went through them 
paragraph bv paragraph,. over the proposed changes and varia¬ 
tions, and thus got an idea of what they asked and determined 
what was reasonable and what I would concede. 


Testimony of Me. Keilsey. 


Ill 


%Q. So that these forms of standard policies ultimately repre¬ 
sented your personal judgment, did they not? A. They did. 

Q. After the conferences of which you have spoken? A. Yes, 
with the experts and with my own actuaries. I don’t know that 
I could pick them now, but I remember there were a number 
of places where I dissented from the opinion of my actuary. For 
instance, where the statute, in my judgment, showed that the 
Legislature had carefully considered the particular sentence in 
the way it was framed; and I would not disturb it where the ex¬ 
perts and the actuaries thought that the intent of the Legislature 
would be carried out much better by smoother phraseology or sub¬ 
stitution of words. 

Q. And in that respect you reserved to yourself the ultimate 
determination? A. Yes, and acted on it. 

Q. And acted upon it? A. Yes, sir. 

Q. Yow, I show you one of the standard — I show you a 
paper (handing paper to witness). Is that one of the standard 
forms of policy that was the subject of examination ? A. It is. 
It is the Endowment. This is one that was forwarded to us, as 
shown by the stamped mark. 

Q. Yow, I show you another paper (handing paper to witness). 
What is that ? A. This is a standard form, Term; this was also 
received by mail. 

Q. This is a Term policy? A. Yes, a Term policy. 

Q. And another paper (handing paper to witness) ? A. This 
is the Limited Payment Life, also received at the same time, 
August 10th. 

Q. And another (handing paper to witness) ? A. This is the 

Ordinarv Life. That makes the four standard forms. These forms 
*/ 

came printed without erasure or interlineation. This shows the 
result after we had been working at it. 

Mr. Hatch.— Give me the first one. 

(Paper handed to Mr. Hatch by witness.) 

Q. That is the Ordinary Life, as I understand ? A. Yes. 

Q. That policy came from where? A. The Actuarial Society, 
as I recall it. 

Q. And that was delivered to you in printed form ? A. Yes. 

Q. Then what are those marks? A. Those erasures and inter¬ 
lineations are such as were directed to be placed there by me after 
going over the papers and advising with my expert actuary. 

Q. And, I suppose, an examination of the statute ? A. Yes. 
Oh, we had the statute all the time that we were considering it. 




112 


Senate Judiciary Committee. 


Q. I show you a letter (handing paper to witness). Whart is 
that? A. A letter from Mr. Weeks, of the New York Life In¬ 
surance Company, dated August 9tli, 1906, written as Chairman 
of the Committee of Actuaries. 

Q. And transmitting what ? A. The complete result of their 
labors on the four forms. 

Q. The complete results of their labors were in four forms 
that were submitted to you as blanks? A. Yes. 

Q. Without any interlineations or marks upon them ? A. Yes. 

The Chairman.— Are those the four forms you have been talk¬ 
ing about ? 

Mr. Hatch.— Yes. I desire to offer this letter in evidence. 

(Letter admitted and marked Exhibit No. 1, of March 21st, 
1907, and the following is a true copy thereof:) 

NEW YORK LIFE INSURANCE COMPANY, 
346-348 Broadway, New York, 

Office of Vice-President and Chief Actuary. 

New Yore:, August 9, 1906. 

* Hon. Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— As Chairman of the Committee of Actuaries which 
has been making a study of the standard forms of policies set 
forth in the new Insurance Law, I have the honor of transmitting 
to you herewith the complete result of our labors. 

The conclusions at which we unanimously arrived are em¬ 
bodied in a brief which has been signed by all of the ten life 
insurance companies participating in the discussion. I enclose 
herewith the original of this brief, containing the signatures, and 
also ffve copies of the same. 

I am also forwarding you six copies each of the four standard 
forms, Ordinary Life, Limited Payment Life, Endowment and 
Term, with indications of the changes which we advocate. A 
Committee of one or more of the actuaries will verv gladly come 
to Albany to discuss these proposals at any time which may suit 
vour convenience. 

I should add that, within two or three days, vou will probablv 
receive letters from the Counsel of the Mutual, Equitable and the' 
New York Life in regard to the following suggestions which they 
may desire to make in addition to or variation from the pro¬ 
posals of the brief. 



Testimony of Mr. Kelsey. 


113 


The points regarding which they may write you are as follows: 

1. See the Ordinary Life form, first page, line 13.— They may 
wish to suggest changing the latter part of this line to read as 
follows: “ and any unpaid premium for the then current policy 
year or any unpaid portion of the premium for the then current 
policy year,” etc. 

2. See same page, line 20.— They may desire to propose that 
the Change of Beneficiary shall take effect only upon endorsement 
by the company upon the policy. 

3. See same page, lines 20 and 21.— One or more of the said 
counsel may desire to substitute the sentence which is in 
brackets in line 21, for the sentence which is understood in line 20. 

We thought it .better not to delay sending you these documents 
until the counsel had reached an agreement upon these minor 
matters. 

Very respectfully yours, 

Ends. RUFUS W. WEEKS. 

Further hearing adjourned to Friday, March 22, 1907, at 
10:30 a. m. 


Proceedings Before the Senate Judiciary Committee on the Mes 
sage of the Governor Relating to the Superintendent of Insurance. 


Senate Chamber, 

Albany, FT. Y., March 22, 1907. 

Proceedings Before the Senate Judiciary Committee on the Mes¬ 
sage of the Governor Relating to the Superintendent of 
Insurance. 

Present.— Senators Davis (Chairman), Armstrong, Page, 
Smith, Cobb, IIinman, Taylor, Grattan and Allds of the 
Committee. 

And Superintendent Kelsey, in Person, and Mr. Hatch, Mr. 
Mayer and Mr. Ainsworth, Counsel. 

The Chairman.— The Committee will be in order. 

S' 

Judge Hatch, the Committee has determined to start now and 
continue until 1 o’clock; then adjourn until 2; reconvene at 2 


/ 





114 


Senate Judiciary Committee. 


and continue until 6, if necessary. I do not* assume you will 
care to run until 6 ? 

Mr. Hatch.— I shall not delay the Committee, that is I trust I 
shall not. 

«* 

Otto Kelsey, resumes the stand. 

Direct. examination continued by Mr. Hatch: 

Q. Mr. Kelsey, I have asked you in part, but I desire you to 
state more fully, as far as you recollect the duties, the new duties, 
that confronted you upon your entry into the office of Superin¬ 
tendent of Insurance ? A. Under the new statute ? 

Q. Under the new statute. A. There was the fire situation at 
San Francisco; the lists of policy-holders that were required to 
he filed from the mutual insurance companies, which were re¬ 
quired to be filed in duplicate, here and in the home office. The 
standard forms of policies, the financial statements for the annual 
reports of companies, those were among the most important duties 
that extended over any length of time. There were constantly 
recurring questions under the new provisions. 

Q. And the form of policy ? A. That was a part of it; then 
in regard to the elections, all the detail in regard to the conduct 
of elections; the preparation of ballots, and proxies and the .return 
envelopes. 

Q. That in those relating to the directors of the mutual life 
insurance companies ? A. Yes. 

Q. Do you recall the extent of the correspondence you had with 
respect to the new law ? A. By comparison with former corre¬ 
spondence and the special letters, do you mean ? 

Q. Y es, the whole amount of it. A. For the ten months there 
was about 10,000 letters, the total of the Department corre¬ 
spondence. 

Q. What did they relate to mainly? A. There was the routine 
business and then the special provisions we have been speaking of. 

Q. And did the correspondence indicate any disturbance of the 
public mind on account of the revelations of the Armstrong Com¬ 
mittee? A. It did. 

Q. Was it directed to that? A. A great deal of it was, from 
individuals and companies and insurance departments of other 
States and from persons generally who were interested in the 
situation. 




Testimony of Mr. Keclsey. 


115 


Q. Are you able to state how many letters on each day, in the 
Albany office, you received which required an answer — that is 
every business day ? A. Sixty or sixty-two as I recollect it, some¬ 
thing of that kind, an average of that. 

Q. It would average that ? A. Yes, sir. 

Q. Do you know how this number corresponded with the num¬ 
ber received in the preceding administration, prior to your taking 
possession ? A. I had a computation made for the corresponding 
ten months of the preceding year, which was also one which was 
very active on account of the pending investigation; and there 
was about four thousand increase over that number. 

Q. During the period of your ten months’ incumbency there 
was an increase over the former period ? A. Yes, sir. 

Q. The increase was during your incumbency of the office ? 
A. Yes, sir; my ten months over the corresponding ten months of 
the preceding year. 

Mr. Hatch.— I desire to have this letter entered into the record, 
this letter Exhibit Ho. 1. 

The Chairman.— That was spread on the record yesterday, 
Judge. 

Mr. Hatch.— I desire to read it to the Committee now. It is a 
letter from Mr. Weeks, the President of tho v "tuarial* Society, 
to the Superintendent, under date of August 0, 1906. 

(Mr. Hatch read the Letter Exhibit 1, which appears at pages 
112 and 113 hereof.) 

Mr. Hatch (continuing).—And attached hereto is the letter of 
the Superintendent dated August 10, 1906, to Mr. Weeks in re¬ 
spect to these matters. 

Q. Did you state who Mr. Weeks was ? A. President of the 
Actuarial Society. 

Q. Did you receive letters from any other companies in respect 
to that matter, submitting forms ? A. We did. 

Q. From whom ? A. I do not know that I recollect. 

Q. Do you recollect the letter from Alexander & Green? A. 
Yes, sir; as counsel. 

Q. Whom did they represent? A. The Equitable. 

Mr. Hatch.— I desire to offer that letter from Alexander & 
Green in evidence, and to have it appear in full on the record. 

(Paper referred to marked Exhibit 2, March 22, 1907, and is 
as follows:) 







116 


Senate Judiciary Committee. 


120 Broadway, New York, August 9, 1906. 

lion. Otto Kelsey, Superintendent of Insurance, Albany, New 
York. 

Dear Sir.— 

De Standard Forms of Policies. 

We understand that there will be forwarded to you to-night 
proofs of the standard forms of policies to be issued by life insur¬ 
ance companies in this State, with certain proposed amendments, 
and a printed explanatory brief signed on behalf of vaiious of 
the life insurance companies. This brief has been signed on 
behalf of our client, The Equitable Life Assurance Society, and 
will, we understand, be forwarded to you by Mr. Pufus W. Weeks, 
the actuary of the Few York Life Insurance Company, with a 
statement to the effect that the Equitable’s approval is subject to 
two suggestions which will be made to you. 

The two suggestions in question are applicable to all of the 
forms submitted. They are as follows, the references by page 
and line being to the corresponding page and line on the Endow¬ 
ment form of policy: 

Page 1, line 17. The policy contains the following provision: 
“ any unpaid premium or unpaid portion of the premium for the 

then current policy year ” We think the words (< premium or 
unpaid ” proposed to be inserted should be omitted. 

These words are apparently thought necessary to permit the 
company to deduct the premium in those cases where death occurs 
during the period of grace. We believe that as a practical matter 
they are not necqssary for such purpose and that in view of the 
lack of a clear and positive forfeiture clause there is grave danger 
that they might be held to imply an agreement by the companies 
to deduct all premiums overdue when the death occurs. It is 
true that the policy provides that in the event of a default in 
the payment of premiums after the policy has been in force three 
full years, extended or paid-up insurance shall be granted. The 
danger, however, in our opinion, is in the event of a lapse of the 
policy before it has been in force three years. 

Page 1, lines 19-23. There is no provision here fixing the 
exact time in which the change of beneficiary shall take effect. 
We would recommend the insertion at line 22, after the word 
“ thereon ” of the following clause: “ such change shall take effect 
upon the endorsement of the same on the policy by the company.” 


Testimony of Mr. Keilsey. 


117 


Clauses authorizing a change of beneficiary have in the past 
been productive of some litigation, many cases having arisen where 
the request for a change of beneficiary had been duly executed 
and the insured had died before any action had been taken by the 
company. Such a stipulation usually involves the company in 
litigation, frequently expensive and dangerous, particularly where 
the parties are residents of different jurisdictions when it is im¬ 
possible to interplead them. In such a case the company, of course, 
runs the risk of a double liability. 

We, therefore, on behalf of the Society, request that the two 
amendments above suggested be made in the forms as submitted, 
provided you feel that you can properly make them. 

Yours very truly, 

ALEXANDER & GREEN. 

The Chairman.— I understand that was forwarded at the same 
time this Weeks’ letter was ? 

Mr. Mayer.— It was mailed the same date, but not forwarded 
with the Weeks’ letter. 

Beneath that there is the following: 

“ The New York Life Insurance Company believes that the 
above suggested amendment would improve the policy forms. 
New York Life Insurance Company by James H. McIntosh, Gen. 
Sol.”; and the other letter from Alexander & Green, they repre¬ 
sent as counsel the Equitable Life Assurance Society. 

Mr. Hatch (resuming) : 

Q. Mr. Kelsey, you received that letter? A. I did. 

Q. Did you reply to that ?. A. I don’t remember distinctly 
the acknowledgment. 

Q. You acknowledged the receipt of those letters (handing 
paper to witness) ? A. Yes, sir. 

Q. And was that matter brought to your personal attention 
and personally considered by you ? A. It was. 

Q. And is this the answer you sent them attached to Exhibit 
2 ? A. Yes, sir. 

Q. Will you please read that in? A. “August 10, 1906. 
Messrs. Alexander & Green, Attorneys, Equitable Life Assur¬ 
ance Society, 120 Broadway, New York City. Dear Sirs.— Your 
letter of August 9th re standard forms of policies, which letter 
bears written approval of Mr. McIntosh, General Solicitor, New 
York Life, is received. 


118 


Senate Judiciary Committee. 


We have before us this day a communication from Rufus W. 
Weeks, (.'hairman of the Committee of Actuaries, forwarding brief 
of said Committee regarding standard forms of policies, together 
with the amended forms. 


The brief of the actuaries, the standard forms as submitted 
and your letter herewith acknowledged, will have the early con¬ 
sideration of this department.” 

Q. I hand you a paper: What is that paper? A. This is a 
brief, referred to by Mr. Weeks. 

Q. And that brief is signed by whom ? A. Signed by the 
various Life Insurance Companies. 

Q. Who are they, just read ? A. Equitable Life Assurance 
Society, per W. A. Day, Vice-President; Germania Life Insur¬ 
ance Company, per C. A. Doremus, President; The Home Life 
Insurance Company, per E. W. Gladwin, Secretary; Manhattan 
Life Insurance Company, by the Secretary; The Metropolitan 
Life Insurance Company, by its Secretary; The Mutual Life In¬ 
surance Company by its Vice-President and Actuary; New York 
Life Insurance Company by its Secretary; Provident Savings 
Life Assurance Society by its Secretarv: The United States Life 
Insurance Company by its Secretary and the Washington Life 
Insurance Company by its President. 

Q. Those signatures which appear there are in writing? A. 
Yes, sir; in handwriting. 

Q. Not printed ? A. No, sir. 

Mr. Hatch.— I desire to offer that brief in evidence. 

(Paper received and marked Exhibit 3, March 22nd, 1907, 
and is as follows:) 

BRIEF 


REGARDING SUGGESTED CHANGES IX STANDARD 
POLICY FORMS, SUBMITTED TO THE HON. OTTO 
KELSEY, SUPERINTENDENT OF INSURANCE, IN 
ACCORDANCE WITH THE UNDER-NOTED PARA¬ 
GRAPH OF SECTION 101 OF THE INSURANCE LAW 
WHICH READS: 


“ The standard forms above provided, or any one or more 
of them, may be altered or amended by the direction of the 
Superintendent of Insurance at any time prior to the first 
da\ of October, nineteen hundred and six, by direction filed 
in his office stating the reasons therefor, and if any such 
alteration or amendment is made the superintendent shall 
promulgate the amended former forms on said date.” 



Testimony of Mr. Kelsey. 


119 


The actuaries of the Life Insurance Companies, whose home 
offices are in the City of New York, and whose actuaries are fel¬ 
lows of the Actuarial Society, have had many meetings at which 
the standard policy forms have been discussed. After the actuaries 
had suggested all the changes which they thought sufficiently im¬ 
portant to warrant alterations or amendments being made in the 
proposed forms, these were submitted to the executive officers and 
the counsel of each company represented. All the changes now 
suggested are the result of the combined deliberations; and they 
are recommended by the companies signing this Brief. 

The reasons for the changes which are suggested fall under 
these groups, namely: 

(1) Meaning doubtful; 

(2) Wording not applicable to certain practical cases; and 

(3) Changes suggested by experience. 

In submitting the modifications, we ought to state that we have 
endeavored to make the least possible variations. We have not 
revised the policy forms as if we had a free hand, but have tried 
to adhere to the wording already laid down, as well as to the 
spirit in which the contracts were originally drawn. 

The first part of the following remarks are applicable to the 
Endowment form, as it comprises all the variations contained in 
the Life and Limited Payment Life forms-the second part re¬ 

lates to the Term policy. A printed copy of the Endowment form 
as originally drawn is attached hereto, and the changes are indi¬ 
cated in the usual way by underscoring new matter and bracketing 
matter to be omitted. Each line is numbered, and references are 
hereafter made to the page and line of the attached contract. 

I. 

Page 1, line 15. The change is proposed to meet the case of 
two or more beneficiaries. 

II. 

Page 1, line 17. “After deducting any indebtedness ” changed 

to “ less anv indebtedness hereon.” The intention is not that the 

t/ 

company should pay, for example, $1,000 after deducting any in¬ 
debtedness, but that it should pay $1,000 less such indebtedness. 
Idle word a hereon ” is inserted because the companies do not wish 
to claim that they can deduct any indebtedness which may exist 
at the time the policy becomes a claim other than that arising 
under the policy contract itself. 



120 


Senate Judiciary Committee. 


III. 

Page 1, lines 17 and 18. “ Unpaid portion of the then current 

year’s premiums ” changed to " unpaid premium or unpaid por¬ 
tion of the premium for the then current policy year.” This 
change is made so as to make it quite clear that, in case of death 
during the month of grace, the past due premium shall be de¬ 
ducted from the sum insured. The “ current year ” might in 
many instances be understood by policy-holders as a calendar year, 
and it was thought advisable to make this clearer. 

IV. ‘ 

Page 1, lines 19 to 23. Three important cases have been kept 
in mind: First, the designation of a single beneficiary; second, 
the designation of two beneficiaries who are to take equal shares in 
the policy, as in the case of two daughters; third, the designation 
of successive beneficiaries, as for example, when a man designates 
his wife as the first beneficiary, and in event of her prior death, 
his daughter. The change proposed is intended to cover all three 
of these cases. The word “ the ” in the first line is changed to 
(i any,” and it is suggested that the contract will be much more 
dear and specific if the interest of any beneficiary were to vest 
in the insured in the event of death of that beneficiary. 

We had also to keep in mind the case where one beneficiary is 
named in the policy, and where the insured afterward substitutes 
several other beneficiaries, share and share alike. 

V. 

Page 1, line 30. In some companies the title “ executive 
officer ” is not defined. It is therefore suggested that, where the 
company so desires, the titles of the several executive officers may 
be inserted in the policy. 

VI. 

Page 1, lines 31 and 32. “ One month ” is generally considered 
to be better grace period than thirty days. Difficulties have arisen 
frequently in case of premiums due, say, on the 15th of January 
tendered on the 15th of February — that is, one day after the 
thirty days of grace expired. Cashiers at branch offices, having 
instructions to accept premiums only within the days of grace, 
lia\ e i efused payments thus tendered. This has been the experi¬ 
ence of several companies with the “ thirty days ” clause. 


Testimony op Mr. Keclsey. 


121 


It is considered unwise to grant this grace period without inter¬ 
est, because if this is done it simply defers the customary date of 
payment for one month longer, since the policy-holder has, under 
such conditions, no object in paying his premium until one month 
after its due date. This is of doutbful benefit to the public, be¬ 
cause the grace period was introduced to prevent accidental lapsing 
through non-payment on the due date, whereas if the due date is 
simply deferred the danger of forfeiture is not removed. 

f 

VII. 

Page 1, lines 34 and 35. The change is proposed partly in 
order to make the clause more definite; and partly because of a 
strong feeling that some companies may desire to exclude military 
or naval service in time of war throughout the duration of the in¬ 
surance, and that they should be entitled to do so, if their judg¬ 
ment so dictates. It is conceivable that a great national war 
might bring insolvency on many companies if all such risks were 
carried. 

VIII. 

Page 1, lines 43 and 50. The change from “ holder ” to 
“ owner of this policy ” is in accordance with the wording of 
section 83 of the law regulating the distribution of surplus to 
policy-holders. 

IX. 

Page 2, lines 54 to 57. The clause “ failure to repay any such 
advance or interest shall not avoid this policy unless the total in¬ 
debtedness to the company shall exceed the aggregate of all un¬ 
paid dividends and accumulations and of .... per cent, (not less 
than eighty per cent.) of the net value of the policy and all addi¬ 
tions thereto, and thirty days’, notice shall have been given by the 
company,” was considered to be impracticable and unworkable 
when applied to individual cases. lit all likelihood the surrender 
values allowed by companies will be on a graded scale which can¬ 
not be represented by any fixed percentage of the net value of 
the policy and of its additions. In the early years of the policy 
the new law (section 88) allows a maximum deduction of $25 
for each $1,000 of the face of said policy, “ if said sum shall be 
more than the said one-fifth ” of the reserve. It is not practi¬ 
cable, therefore, to give a general rule applicable at every age, 
and for every policy year, in the manner indicated in the clause 


122 


Senate Judiciaey Committee. 


as originally drawn. The proposed adjustment providing that the 
policy shall be avoided only in those cases where the total in¬ 
debtedness shall ecpial or exceed the surrender value provided for 
in section 88 of the Insurance Law of the State of New York is in 
complete harmony with the law, and is in a practicable form. 

After a loan is made it is sometimes impossible to locate the 
insured or the assignee, and therefore notice of the intended 
forfeiture cannot be given. Accordingly, all that should be re¬ 
quired of companies is that they mail notice that the policy is 
about to terminate to the last known address of the insured or 
the assignee, and is required under section 92 of the Insurance 
Law regarding forfeiture for non-payment of premiums, or in¬ 
terest. 

X. 

Page 2, line 6. It is proposed to strike out the words “ prior 
to any default or,” because these words are entirely unneces¬ 
sary. If a policy-holder is about to claim paid-up insurance 
for a reduced amount, he is surely entitled to continue his policy 
for its full amount until the next premium falls due, and he 
has sufficient time to claim the amount “ within three months after 
any default.” The change prior to default would be to deprive 
the beneficiary, in the event of the death of the insured, of the 
difference between the original and the reduced amounts. 


XI. 

Page 2, line 62. The insertion of the word “ either ” tends to 
clearness of expression. 

XII. 

Page 2, lines 62 and 63. We suggest that the phrase “ at 
its full amount be changed to “ for its face amount and any 
outstanding dividend additions ”— that evidently being the intent 
of the phrase. 

XIII. 

Page 2, lines 63, 66 and 101. Ihe omission of some such 
words as without the right to loans ” was presumably an over- 
sight, as it is incorrect to grant a loan on temporary extended 
insuiance under which the reserve, and therefore the security, 
diminishes yearly and ultimately disappears. 



Testimony op J^Ir. Kersey. 

XIY. 


123 


Page 2, lines (35 to G8. Instead of the words (< except as to 
the payment of premiums and participation ” we have introduced 
the words non-participating paid-up ” in another part of the 
sentence. These changes make the meaning clearer, as they are 
expressed in words which are in general public use. 

The word a minimum,” which occurs twice towards the end 
of the paragraph, is unnecessary, and might lead policy-holders 
to expect more. 

XY. 

Page 2, lines 71 and 73. It is suggested that the following 
clause be inserted; as some companies may desire to avoid the 
expense and liability to error involved in writing in the values, 
preferring to print them on the basis of each $1,000: 

(At the option of the company the following clause may be 
inserted: 

The loans and paid-up insurance values stated in the 
following table apply to a policy for $1,000. As this con¬ 
tract is for $ the loan, paid-up insurance or pure 

endowment available in any year will be the amount 

stated in the table for that year.) 

XYI. 

Page 2, lines 78 and 79. It is suggested that these lines be 
struck out. The law provides for values only after three annual 
premiums have been paid, and if the standard policy form 
showed spaces for values beginning with the* first year, the in¬ 
sured would suppose that any company leaving these spaces blank 
had not complied with the law. It seems to be inconsistent with 
the law therefore that the standard policy should provide spa'ces 
for values beginning with the end of the first policy year. If 
it be urged that some companies may give values beginning with 
the first year, nothing in the proposed change would prevent a 
company from being more generous than the law, and inserting 
these values bv hand. 

XYII. 

Page 2, line 98. The words a on the same basis/’ under the 
table of values, might be very misleading. In all likelihood the 
basis on which paid-up insurance will be computed will be a 
graded scale of percentages of the reserve values. These values 


124 


Senate Judiciary Committee. 


must, by the provisions of the law, be computed by the American 
Experience Table at the rate of interest used for valuation pur¬ 
poses, and the values allowed may, in accordance with the prac¬ 
tice of many companies, be based upon percentages running as 
follows: 98, 99, 100 per cent, for the last three years in the table. 
It would be incorrect to continue this scale of percentages, be¬ 
cause a company cannot pay 101 or 102 per cent, of the reserve 
value. Moreover, the words appear to be unnecessary. 

XVIII. 

Page 2, lines 99 to 106. The changes proposed are submitted 
in order to make the meaning more clear, and avoid possible 
misconception on the part of policy-holders. The words “ less 
the indebtedness/’ as used in the blank, might lead policy-holders 
to suppose that they were entitled to have the insurance con¬ 
tinued at its face amount “ less the indebtedness ” for the time 
mentioned in the table; in other words, that the indebtedness 
would be deducted only in event of death during the continued 
term. This would of course be incorrect, and would cause the 
companies serious loss in many such cases. 

We think that the words “ if the sum applicable to the pur¬ 
chase of temporary insurance shall be more than sufficient to 
continue said insurance to the end of the endowment term named 
in the policy ” have been omitted; they are in accordance with 
the provisions of the law, and are necessary in consequence of 
the construction of the sentence. 

XIX. 

Page 2, lines 109 to 112. This clause might be considered as 
meaning that the owner of the policy can reinstate it within three 
years without giving satisfactory evidence of insurability, but 
simply by the payment of the premiums with interest and on 
“ written application therefor.” This surely cannot have been in¬ 
tended, as it would allow a man on his death-bed to reinstate his 
policy even although it were just about to expire. The proposed 
changes are intended to cover the probable intent of the Com¬ 
mittee and enable the insured to reinstate his policy within the 
first three years of the extended term on satisfactory evidence of 
insurability. 

i he clause originally printed may also be read as permitting 
the owner to reinstate the policy at any time within the extended 


Testimony of Mr. Kelsey. 


125 


term (it might be after ten or fifteen years) on satisfactory evi¬ 
dence of insurability. It is scientifically incorrect to reinstate a 
policy after the extended term insurance lias been in force for 
many years on payment only of the premiums, even with com¬ 
pound interest tliereon. A company cannot afford to allow an un¬ 
limited right of reinstatement, as it would be unjust to other 
policy-holders; moreover, it would encourage the lapsing of poli¬ 
cies. But we consider it would not he unreasonable to allow this 
concession “ within the first three years of said term,” and we 
have drafted the clause accordingly. 

XX. 

Page 3, lines 113 and 114. The words “ or in case the insured 
shall not have elected the beneficiary after his death” are not 
clear, and the change is suggested with the view of expressing the 
evident intention of the framers of the policy. 

XXI. 

Page 3, lines 118, 124, 131 and 142. It is suggested that the 
words “ legal representatives or assigns ” are not sufficiently def¬ 
inite, and that they should be replaced by the usual phrase “ ex¬ 
ecutors, administrators or assigns ” in the four places indicated. 


XXII. 

Page 3, lines 114 to 137. The words “ total sum ” have been 
changed to “ net sum ” in the places indicated, because the amount 
actually payable under the policy may he greater or less than the 
face value, by reason of dividend additions or indebtedness. 

XXIII. 

Page 3, line 121. The usual practice of companies is to pay an¬ 
nual instalments at the “ beginning ” of each year. In other 
words, the first instalment is payable upon receipt at the com¬ 
pany’s home office of due proof of death, and subsequent instal¬ 
ments each year thereafter. This is in accordance with the wishes 
of the public, because the first instalment is often desired to meet 
funeral and other expenses incident to the death of the insured. 
The same change is made in lines 135 and 138. 


126 


Senate Judiciary Committee. 


XXIV. 

Page 3, lines 143 and 144. It is desired to insert here a para¬ 
graph reading as follows: 

u When any option calling for annual payments is elected 
this policy shall be surrendered and a supplementary non- 
participating contract shall be issued for the option elected. 77 

It was evidently anticipated by the framers of the policy that 
such a supplementary contract would he issued, because they refer 
to u the agreement for the payment of annuity or instalments 7 
in the paragraph immediately preceding the Table of Instal¬ 
ments. 77 

The advantages to the beneficiary of having a supplementary 
contract are: (1) the exact payments are stated, and the dates on 
which such payments are to be made; (2) the name of the payee 
is inserted in the supplementary contract. These particulars are 
not determined until the maturity of the policy or the death of the 
insured, and until the particular option has been selected. Forms 
for such supplementary contracts have been prepared, and are 
submitted herewith. 

* 

XXV. 

Page 3, lines 145 to 150. The principal change suggested in 
the paragraph immediately preceding the a Table of Instalments 77 
relates to the surrender of a life annuity. It is submitted that the 
surrender of such annuities is contrary to public policy and to the 
practice of the present day, on the ground that an annuitant, how¬ 
ever good his or her health might he, might have the intention of 
committing suicide. When the instalments are payable for a fixed 
period, there is no scientific objection to commutation in the man¬ 
ner suggested. But when they are dependent also upon the life 
of a beneficiary, the question becomes a very different one on ac¬ 
count of the difficulty of determining the value of the life. 

Furthermore, it would he incorrect to allow the commutation of 
such instalments in the case of Options 3 and 6 computed u upon 
the same basis as the following table, 77 because the table under 
these options provides for instalments for “ fixed period of twenty 
years, and so many years longer, etc. 77 It would therefore he in¬ 
correct to allow commutation on the same basis after the lapse of 
five or ten years, because there would no longer he the fixed 
period of twenty years in the annuity benefit. The clause as 


Testimony of Me. Keclsey. 


127 


originally drawn was therefore incorrect, and would have misled 
policy-holders. 

XXVI. 

Page 3, lines 153 to 156. The changes suggested in the word¬ 
ing of the “ Table of Instalments ” are such that we have no doubt 
they will commend themselves; they are made solely with the view 
of making the meaning more clear. 

XXVII. 

Page 3, line 157. It is proposed that there be inserted: 

“ Xo person except an Executive Officer of the Company 
as aforesaid has power to modify this policy or to extend the 
time for paying a premium.” 

A clause of this kind, which defines the power of agents, is very 
necessary; otherwise no one can tell to what extent changes might 
be made without proper authority. An agent’s powers are usually 
carefully defined in the instrument appointing him, but it seems 
desirable for the protection of the policy-holders to warn them that 
changes in their policies can he made only by an Executive Officer. 

TERM POLICY. 

Many of the changes in this form are exactly the same as those 
above recommended for the endowment contract. It is therefore 
unnecessary to make further reference to these. 

XXVIII. 

Page 2, lines 55 and 65. The privilege of renewal should be 
vested in the owner of the policy, who might not be the insured. 

XXIX. 

Page 2, line 55. The clause as drawn did not cover the exact 
age of sixty-five, accordingly, instead of stating “ if under the age 
of sixty-five years,” it is suggested that the form read, “ if the 

insured be not over the age of sixty-five years . 

• 

XXX. 

Page 2, lines 56 and 57. As a practical means of affecting the 
renewal of such a policy, some notation should he made upon the 


128 


Senate Judiciary Committee. 


policy itself in addition to the filing of written notice. Accord¬ 
ingly, we propose the insertion of the words, u accompanied by this 
policy for suitable indorsement 

XXXI. 

Page 2, lines 59 and 60. In like manner, if an ordinary life 
policy be desired after the age of sixty-five years, a new contract 
would have to be issued showing the loan values and other privi¬ 
leges of an ordinary life contract in the standard form. Accord¬ 
ingly, provision should he made for the surrender of the term 
policy at the issue of an ordinary life policy at that time in lieu 
thereof, hence the changes indicated in this line. 

0 

XXXII. 

Page 2, line 65. Companies should have the right to state at 
what time the privilege of change may be exercised. Many 
actuaries object strongly to granting this change when an ordinary 
term policy is just about to expire, because of the heavy mortality 
which is likely to be experienced by policy-holders who exercise 
the privilege at that time. Accordingly, we recommend that the 
words “ at any time within the first years” he inserted, 

leaving the company at liberty to insert the number of years. 
Some companies may insert the same number as the duration of 
the policy, giving the privilege for the entire term; but others 
could provide against the heavy mortality above indicated by giv¬ 
ing the privilege for a shorter period only. 

XXXIII. 

Page 2, line 66. The word “ participating ” seems to he un¬ 
necessary in view of the other changes in the line; it would he out 
of place if the policy were issued by a stock company. 

XXXIV. 

Page 2, line 69. The provision is here inserted that the entire 
net value of the policy must be allowed towards payment of 
premiums under the new contract. This would result in anomalies 
in individual cases, and would enable some policy-holders to obtain 
a larger surrender value than that provided in the law. It is sug¬ 
gested, therefore, that the words “ eighty per centum of” he 


Testimony oe Me. Keilsey. 


129 


inserted, so as to harmonize with the surrender value provisions 
in other policies, and with section 88 of the Insurance Law. In 
this particular case we do not think it necessary to provide for the 
minimum deduction of $25, authorized in section 88; to do this 
would make the form cumbrous. 

Equitable Life Assurance Society, 

Per W. A. Day, vice-president. 

Germania Life Insurance Company, 

Per C. A. Doremus, president. 

Home Life Insurance Company, 

Per E. W. Gladwin, secretary. 

Manhattan Life Insurance Company, 

Per M. W. Torrey, secretary. 

Metropolitan Life Insurance Company, 

Per Jas. S. Roberts, secretary. 

Mutual Life Insurance Company, 

Per Emory McClinton, vice-president and actuary. 

Hew York Life Insurance Company, 

Per Seymour M. Ballard, secretary. 

Provident Savings Life Assurance Society, 

Per John ML Vrooman, secretary. 

United States Life Insurance Company, 

Per Wheelwright, secretary. 

Washington Life Insurance Company, 

Per John Tatlock, president. 

Q. And this printed brief which has just been read and which 
you have identified, that refers to what? A. To changes desired 
from the form of the standard policy as printed in the statute, so 
as to make it workable and to adjust it to the business of the 
companies. 

Q. And this brief refers to the printed lines? A. Ho, sir; to 
the lines printed on the form we had printed. They do not run 
the same lines as it would be found in the statute. 

Q. And has that any reference to the memoranda upon those 
proposed standard policies which are written in ink ? A. The 
brief refers to it as first printed; the changes desired; after that 
came corrections I made in the policy. 

Q. And this brief is an argument taking up each line and state¬ 
ment of the standard policy ? A. Yes, sir. 

9 


130 


Senate Judiciary Committee. 


Q. Did you consider that brief ? A. I did. 

Q. State how you considered it? A. I had the forms on my 
desk and I took the suggestions up one at a time, comparing the 
requests of the company with the language in the printed form 
of policy, to determine whether they could be allowed or not. 

Q. Did you make any memoranda upon the policy? A. I had 
it done. 

Q. You either did it or directed it to be done ? A. Yes. After 
I had gone through the whole policy I had the chief actuary sit 
down with me — he had gone over it apart from me — and we 
then conferred and arranged for the changes. 

Q. And those changes you directed to be written on the policy ? 
A. Yes, sir. 

Q. And did they affect every line ? A. Not every line possibly, 
but it did a great many of the different clauses and paragraphs. 

Q. I believe you stated that you had not only this written brief 
submitted and the letters hut you also had conferences with vari¬ 
ous members of the insurance companies? A. We did. 

Q. And counsel ? A. Yes, and we also had other communica¬ 
tions. 

Q. To what extent? — State fully. A. There were letters 
from actuaries, including Mr. Dawson. 

Q. Who was Mr. Dawson? A. He was the Actuary for the 
Armstrong Committee, consulting actuary. 

Q. Go on. A. He wrote quite a lengthy letter similar to the 
brief marking the line and suggesting the changes in words. 

Q. Were there consultations with others ? A. There were. 

Q. State-whom? A. There were representatives of the various 
companies, actuaries, officers, and I think Mr. Jenkins from the 
Security Mutual was there. 

I think Mr. McIntosh of the Yew York Life was there, I was 
talking with him and Mr. Yan Cise of the Equitable. 

I do not think I could remember off-hand all of them; there 
were numbers came in. 

Q. And the form of this policy was then the subject of discus¬ 
sion ? A. It was during the period of weeks being perfected. It 
was taken up at intervals. 

Q. How much time elapsed between the time you started to 
consider it and the time it was fully completed by you ? A. From 
soon after I took office until shortly before the 1st of October. The 
statute directed its completion and promulgation by October 1st. 




Testimony of Me. Kelsey. 131 

Q. 1 ou are now speaking of the four forms ? A. The four 
forms. 

Q. How give me those four forms. (Papers produced.) How 
the interlineations or the writing that appears thereon, was that 
writing made by your direction ? A. It was. 

Q. And after the examination of which you have spoken ? 

A. Yes. 

Q. What is the form which I hand to you? A. It is the 
Ordinary Life. 

Mr. Hatch.— I desire to have that marked in evidence. 

(Paper received and marked Exhibit 4, March 22, 1901.) 

The Chairman.— Judge you do not want this policy form 
written in the record? 

Mr. Hatch.— Ho; we will give the stenographer directions as 
to the portions. 

Senator Armstrong.— It might be well, Judge, if you would 
indicate what you want spread on record. 

Q. I show you another paper, what is that ? A. The Limited 
Payment Life, the form. 

Q. That is one of the forms required by law? A. Yes, one of 
the four forms required by law. 

Q. Are the interlineations on that policy made after the confer¬ 
ence directed by you ? A. Yes. 

Q. Is there a single mark or line on that policy, either written 
or printed, that was not considered by you, and that represents 
your judgment ? A. There is not. 

Q. And it was your ultimate judgment that determined the 
form ? A. It was. 

Mr. Hatch.— I ask to have it marked in evidence. 

(Paper received and marked Exhibit 5.) 

Q. I show you another paper; what is that ? A. This is the 
Term Policy form. 

Q. Do you make the same answer with respect to that policy 
that you did the last one inquired about ? A. Precisely. 

Mr. Hatch.— I desire to have that marked in evidence. 

(Paper received and marked Exhibit 6, March 22, 1907.) 

Q. 1 show you another paper; what is that? A. The form of 
the Endowment Policy. 

Q. One of the four? A. One of the four forms. 

Q. Please state whether you make the same answer with respect 
to the amendments which appear in that policy, as you did to the 

others? A. I do. 





132 


Senate Judiciary Committee. 


Mr. Hatch.— I ask to have it marked in evidence. 

(Paper received and marked Exhibit 7, March 22, 190 1.) 

Q. Were these the copies from which the standard policy was 
printed? A. It was reprinted there, and there may have been 
some small changes and corrections in the subsequent reprint; but 
that is substantially the policy. 

Q. That is, after those amendments were made, then the four 
standard policies were printed ? A. Yes, sir. 

Q. With those corrections as indicated there ? A. Yes. 

Q. Then what was done with them ? A. Copies of it were sent 
to the various companies, the parties who had been interested, 
when it was finally completed. 

Q. Then did that go back? — Were there any amendments 
made to that? A. Nothing very serious. I do not recall. There 
may have been slight alterations. 

Q. And then they were promulgated ? A. Yes, sir; then they 
were promulgated and all reprinted and distributed for use. 

Q. I show you a paper; what is that ? A. That is the official 
decision promulgating the form of policy. 

Q. Made by whom ? A. By me. 

Q. You wrote it? A. I wrote it myself. 

Mr. Hatch.— I ask to have this marked as an Exhibit. 

(Paper received and marked Exhibit 8, March 22, 1907.) 

Mr. Hatch.— I desire to read this into the record. 

“Alterations in the standard forms of life insurance policies 
made by direction of the Superintendent of Insurance pursuant to 
section 101 of the Insurance Law. 

Section 101 of the Insurance Law, prescribing standard forms 
for all policies of life insurance, other than industrial policies, 
which shall be issued or delivered within this State by any domes¬ 
tic life insurance corporation on and after the first day of January, 
1907, is a new section. Eollowing the several forms therein the 
statute directs that any one or more of them may be altered or 
amended by the Superintendent of Insurance at any time prior 
to the first day of October, 1906, by direction filed in his office 
stating the reasons therefor, and if any such alteration or amend¬ 
ment is made the Superintendent shall promulgate the amended 
form or forms on said date. 

Various life insurance companies through their actuaries, 
executive officers and counsel, have prepared and submitted sug- 





Testimony of Mr. Kersey. 


133 


gestions for changes in the statutory forms which they deem a 
necessity and recommend for favorable action hy the Superin¬ 
tendent of Insurance. A large correspondence presents additional 
proposals for amendments. 

In directing the adoption of amendments only such proposals 
as appear essential to correct an ambiguity in the phraseology or 
manifest errors, or omissions made in drafting the original text, or 
variations necessary to express clearly the intent of the law and 
obviate defects or causes of probable misunderstandings, have 
been given attention. The purpose has been to not interfere with 
the language of the statute where the meaning is certain, unless 
shown to have been based upon a misapprehension of conditions 
and that changes in the verbiage are a practical necessity. Slight 
additions or modification explanatory of technical clauses have 
been made in a few instances. Numerous propositions substi¬ 
tuting terms or sentences as preferable to those found in the law 
have not been regarded as entitled to serious consideration. In 
whatever form enacted, if the provision is definite and from its 
context or relation to precedents or legal usage bears evidence that 
the wording was so selected by the legislature, no alteration has 
been thought proper even if mutual advantages to contracting 
parties are assumed to be gained. The same rule has been followed 
as to many suggested interpolations of words or sentences not in¬ 
cluded in the legislative forms. 

Reasonably construed the statute does not authorize supple¬ 
mentary legislation by the heael of the Insurance Department, but 
permits him to make such changes as are necessary to adjust the 
standard forms of policies to the conduct of business within the 
plan distinctly circumscribed and embodied in the law. 

After careful deliberation upon the questions involved the Su¬ 
perintendent of Insurance has determined upon several alterations 
and amendments to such standard forms of policies as shown by 
the forms hereto attached and filed in this department, and directs 
the promulgation of such amended forms to take effect the first 
day of October, nineteen hundred and six. 

OTTO KELSEY, 
Superintendent of Insurance . 

Insurance Department, Albany, N. Y.” 

Senator Page.— May I ask Mr. Kelsey one question? 

Mr. Hatch.— Yes, sir. 



134 


Senate Judiciaky Committee. 


By Senator Page: 

Q. Did I understand that these corrections were in your hand¬ 
writing? A. No. 

Q. In whose handwriting are they ? A. The Chief Actuary, 
Mr. Paterson. 

By Mr. Hatch (resuming) : Q. They were made, however, 
Mr. Kelsey, by your direction ? A. They were, and a portion of 
them written while sitting right at my desk. 

Mr. Hatch.— I desire to convey the impression that everything 
that was done there he determined it ultimately. 

Q. Did you have any connection with this beyond what you 
have stated in the correspondence ? A. There was correspondence 
during the time it was being considered. 

Q. I show you a paper and ask you what it is ? A. It is the 
New York Standard Form of Ordinary Life policy as completed. 

Mr. Hatch.— I desire to have that marked in evidence. 

(Marked Exhibit 9.) 

Q. What paper is this which I now hand you ? A. A com¬ 
pleted form for the Limited Payment Life. 

Mr. Hatch.— I ask to have it marked. 

(Marked Exhibit 10.) 

Q. And this one (handing paper) ? A. The standard form for 
the Endowment. 

Mr. Hatch.— I ask to have it marked. 

(Marked Exhibit 11.) 

Q. What is the next paper? A. That is the Term form. 

Mr. Hatch.— I will have that marked. 

(Marked Exhibit 12.) 

Q. I made an inquiry concerning your correspondence with, 
respect to these policies, in addition to what you have already 
stated, is there any thing further after the promulgation — there 
was correspondence ? A. There was correspondence. 

Q. Has that correspondence been continuous up to the present 
date ? A. It has. 

Q. And will you state the nature and the extent of it? A. It 
consists principally of inquiries in relation to the meaning of 
clauses and the construction placed upon them by the Depart¬ 
ment. 

Q. Can you state anything about the volume of that correspond¬ 
ence? A. Not without refreshing my recollection. 

Q. It was large ? A. It was. 










Testimony of Mr. Kelsey. 


135 


Q. Did that correspondence all come under your personal ob¬ 
servation ? A. All of it. 

Q. And did you reply to it ? A. I did. 

Q. And who dictated the reply ? A. It was through the Chief 
Actuary. The letters would be brought to me with a statement 
by the actuary of what was contained in them; there was a brief 
discussion and a determination on the reply, which would be 
dictated by him, and the completed letter was then brought* to me 
for signing. 

Q. Did any letters go out with respect to this subject that were 
not supervised by you ? A. Not one. 

Q. And any correspondence had in answering the letters which 
you received, when the letter was drafted did you at any time 
make changes in it? A. I did occasionally. 

Q. And then they were recopied ? A. Yes, sir. 

Q. Are you able to state, Mr. Kelsey, that the whole of this 
matter was conducted by you personally and rested upon your 
ultimate determination? A. I am. 

Q. Now will you state to the Committee, Mr. Kelsey, why you 
supervised this branch of the work, giving it your personal atten¬ 
tion ? A. I saw every part of it, to have it as I thought it should 
be, or as in my judgment it should be. 

Q. Well, the law imposed upon you the obligation ? A. The 
responsibility was with me, and I assumed it. 

Q. And discharged it ? A. And discharged it. 

Q. Mr. Kelsey, did the law provide for another form of policy ? 
A. The same section provides for additional forms. 

Q. That is what section? A. Section 101. 

Q. Will you state to the Committee what forms section 101 
provides for in addition to the four standard forms ? A. It pro¬ 
vides that upon application by any life insurance company for an 
additional form, asking for the approval of the Department, that 
the Superintendent should notify all other companies, and appoint 
a date for a hearing at which it should be considered, and then 
determine on the form submitted. 

Q. Were any such policies submitted? A. There were. 

Q. How many ? A. Large number. I could not state without 
refreshing my recollection first. 

Q. Are you able to state from how many insurance companies ? 
A. My recollection would be a dozen at least. 

Q. Let me ask you with respect to special companies — the Buf¬ 
falo Life Insurance Company? A. Yes; they had several forms, 


130 


Senate Judiciary Committee. 


Q. How many, do you recollect? A. Four, I tliink. 

Q. In what form were they ? A. They had a new form or 
scheme of life insurance and their forms are copyrighted; and 
they wanted to have them approved by the Department and the 
right to use them as additional forms. 

Q. By whom were those policies presented to you ? A. Mr. 
Channel. 

Q. Who is he ? A. One of the officers of the company. He 
had been to see me at the Department on several occasions prior to 
ihe time they were presented as additional forms. 

Q. I hand von several papers. What are those ? A. They 
are the five special copyrighted forms of policies submitted by 
the Buffalo Life Insurance Company. 

Q. So they were five instead of four? A. Five instead of four. 

Q. And you had correspondence about these copyrighted 
forms? A. Yes., sir. 

Mr. Hatch.— I desire to offer them in evidence. 

(Marked Exhibit 13.) 

Q. I show you a paper. That is the result of their application, 
is it not? A. That is the conclusion reached after the hearing — 
the decision. 

Q. That is the conclusion? A. Yes. 

Q. Will you read that Mr. Kelsey ? A. “ Buffalo Life Insur¬ 
ance Company,” is the heading. “ Five special copyrighted forms 
of policies submitted by this company, and letters relating thereto. 
These forms of policies were not approved.” 

Q. The Equitable Life Assurance Society — did they present 
any form ? A. They had three forms, I think. 

Q. And the Germania Life Insurance Company? A. They 
had some forms. 

Q. Can you state how many ? A. I could not. 

Mr. Hatch.— I ask to have this paper marked. 

(Marked Exhibit 14.) 

Q. The Metropolitan Life Insurance Company. How about 
that company? A. They had three or four forms. 

Q. The Provident Savings Life Assurance Society? A. They 
had three or four forms. 

Q. And the Security Mutual Life Insurance Company? A. 
It also had a form; I don't know but it had two. 

Q. And the United States Life Insurance Company ? A. They 
had a form. 






Testimony of Me. Kelsey. 


137 


Q. How many? A. I do not recollect. 

Q. The Washington Life Insurance Company ? A. It also had 
one. 

Q. It had one? A. It had one or more forms. 

Q. How the Postal Life Insurance Company? A. They also 
submitted forms. 

Mr. Hatch.— I desire to introduce those proposed forms in evi¬ 
dence; the forms of course will not go in the record hut I will 
give a statement with respect to these. Mr. Kelsey will you read 
the statement? A. “ The Equitable Life Assurance Society of 
the United States ” is the heading. “ Two special policy forms 
Ordinary Life and Limited Payment Life, ‘ continuous install¬ 
ment’; with letter relating thereto. These forms of policies were 
not approved.” 

Mr. Hatch.— I will have that marked in evidence. 

(Marked Exhibit 15.) 

Mr. Mayer.— I will submit these exhibits Judsre. The next 
relates to the Germania Life Insurance Company. I ask to have 
them marked in evidence. 

(Marked Exhibit 16.) 

Mr. Mayer.— They are described as “ Germania Life Insurance 
Company — three special policy forms, ‘ Dividend Accumulation 
Policy ’, ‘ Supplementary Agreement ’, ‘ Children’s Endowment ’, 
and letters referring thereto. These forms were not approved.” 

The next is the one submitted by the Metropolitan Life Insur¬ 
ance Company. I ask to have them marked. 

(Marked Exhibit 17.) 

Mr. Mayer.— They are described as follows: “ Three Special 
Policy forms, ‘ Life with - Premium Reduced after Twenty Years 
‘ Modified Endowment with Life Option ’, ‘ Guaranteed Increased 
Endowment ’, with letters- referring thereto. These forms were 
not approved.” * 

The Witness.— One of these forms, the Metropolitan Life was 
very strenuous about. The vice-president, Mr. Haley Fiske, 
stated that in one year forty per cent, of their business and in 
other years from thirty to forty per cent, had been written on 
that form of policy; that their agents were accustomed to it, and 
they knew how to recommend and urge it; and he regarded it as 
vital to his company to have that form. Mr. Milburn also ap¬ 
peared as counsel to urge favorable action on that. 





138 


Senate Judiciary Committee. 


By Mr. Hatch: 

Q. That form was not approved? A. No. 

Q. Why ? A. On decision of mine that the Legislature having 
specified four standard forms covering the four lines of life insur¬ 
ance, that forms asked for which interfered or covered the same 
ground included in the standard forms should not he approved; 
that those forms by the statute were limited, and we could not get 
an unlimited number of additional forms. 

Q. And within that rule which you established this policy fell 
under condemnation ? A. That and the Equitable, the United 
States, the Provident Savings and the Security, most all of those 
except the actuaries’ forms. 

Q. Now the next is the Provident Savings Life Assurance So¬ 
ciety, one special policy form. State what that was ? A. (Read¬ 
ing) u Provident Savings Life Assurance Society. One special 
policy form, ‘ Combined Term and Renewable Life ’, with letters 
and brief relating thereto. This form was not approved.” 

Mr. Hatch.— I will have that marked. 

(Paper marked Exhibit 18.) 

Q. The next is the Security Mutual Life Insurance Company, 
one form. Tell us about that and what was done with it? A. 
The “ Security Mutual Life Insurance Company. One special 
policy form — ‘ Year Term Renewable,’ and letters relating 
thereto. This form was not approved.” 

Mr. Hatch.— I will ask to have this form marked as an exhibit. 

(Marked Exhibit 19.) 

Q. The next is United States Life Insurance Company, one 
form. Tell us about that? A. (Reading) “ United States Life 
Insurance Company of the State of New York. One special form 
of policy, 1 Graded Heath Claim Values Policy ’, with letter relat¬ 
ing thereto. This form was not approved; also one ‘ Non-Partici¬ 
pating form ’ of Standard Life Insurance Policy, ‘ Ordinary 
Life ’, with letter relating thereto. This form was not approved.” 

Mr. Hatch.— Have it marked. 

(Marked Exhibit 20.) 

Q. The next is the Postal Life Insurance Company? A. 
(Reading) u Postal Life Insurance Company, one special policy 
form, Optional paid-up Life or Endowment and letters relating 
thereto. This form was not approved.” 


Testimony of Mr. Kelsey. 


139 


Mr. Hatch.— I will have that marked. 

(Marked Exhibit 21.) 

Q. And that was not approved? A. Ho, sir. 

Q. Who submitted that ? A. Mr. Malone appeared at the 
hearing. 

Q. Do you know whose policy it was ?— Is that the Dawson 
policy ? A. Subsequently Mr. Dawson inquired about it. 

Q. What was there about that ? A. That was after the hear¬ 
ing in December and prior to the entering of the final decision 
here, and Mr. Dawson made an inquiry as to the allowance of that 
policy. 

Q. Hext is the Washington Life Insurance Company. Tell us 
about that? A. (Reading) “ Washington Life Insurance Com¬ 
pany. One ‘ Hon-Participating ’ form of Hew York Standard 
Life Insurance Policy, ‘ Ordinary Life ’, with letters relating 
thereto. This form was approved.” 

Mr. Hatch.— I will ask to have that marked. 

(Marked Exhibit 22.) 

Mr. Hatch.— Whether a form was “ Approved ” or “ Hot ap¬ 
proved,” who made that determination ? A. I did. 

Q. And the contusion reached there is the result of your in¬ 
dependent judgment ? A. Yes, sir. 

Q. When these policies were submitted what course was taken 
concerning them? A. A date was fixed for a hearing and notice 
was given to the various life insurance companies. 

Q. Was there a committee appointed in connection with them? 
A. A committee of the Actuarial Society presented a series of 
forms for approval. 

Q. What is that society? A. Its membership is composed of 
the actuaries of the country. 

Q. The actuaries connected with the life insurance companies ? 
A. Those connected with the insurance companies and others who 
are consulting actuaries. 

Q. Do you know how many of them there were ? A. Of the 
forms ? 

Q. Ho; of the actuaries ? A. I do not recall. 

Q. Each insurance company has an actuary? A. Yes; some 
of them have two or three. 

Q. And they made up the Actuarial Society? A. Yes; but 
there are also others in it not connected with the companies. 

Q. I show you a list: What is that ? A. This gives the 
Committee. 





140 


Senate Judiciaky Committee. 


Q. And that was composed of how many people, that commit¬ 
tee ? A. Eleven. 

Q. What did that committee do? A. They drafted and pre¬ 
sented forms, additional forms, for approval or disapproval. 

Q. Now in addition to the forms already spoken of, do you 
know how many there were ? A. I do not recall without refresh¬ 
ing my recollection how many they presented. 

Q. Well, about how many ? A. I do not know that I can un¬ 
dertake to state; a dozen or so, may be more. 

Q. Have you those? A. Yes, sir. 

Mr. Hatch.— I will state for the benefit of the Committee that 
these forms run from 14 to 34 inclusive, twenty altogether, and 
those I desire to offer in evidence. 

Mr. Mayer.— This committee is composed of eleven actuaries 
of the leading life insurance companies, and here is a list of them. 

“ Committee of Actuaries of the Actuarial Society of America: 
Rufus W. Weeks, Chairman, New York Life Insurance Company; 
Henry Moir, Secretary, Provident Savings Life Assurance So¬ 
ciety; J. G. Van Cise, Actuary, Equitable Life Assurance Society; 
William A. Hutcheson, Actuary, Mutual Life Insurance Com¬ 
pany; Morris W. Torrey, Actuary, Manhattan Life Insurance 
Company; George W. Hubbell, Actuary, United States Life In¬ 
surance Company; James M. Craig, Actuary, Metropolitan 
Life Insurance Company; William A. Marshall, Actuary, Home 
Life Insurance Company; Arthur Hunter, Actuary, New York 
Life Insurance Company; G. L. Plumlev, Actuary, Washing- 
ton Life Insurance Company; John Fuhrer, Actuary, Germania 
Life Insurance Company.” 

By Mr. Hatch: 

Q. I shall offer in evidence the Single Premium Life form 
proposed by the Committee of Actuaries. What is that Mr. Kel¬ 
sey ? A. (Reading) “ New York Standard Life Insurance Pol¬ 
icy. Single Premium Life.’ This form was approved.” 

(Paper marked Exhibit 24.) 

Mr. Mayer. I next offer in evidence the form proposed bv 
the Actuaries Committee known as a The Yearly Renewable Term 
of Ordinary Joint Life, etc.” 

Q. Will you state what that form is ? A. (Reading) “ New 
York Standard Life Insurance Policy. ■ Yearly Renewable term,* 
Ordinary Joint Life.* These forms were approved. ‘ Six paid- 




Testimony of Mr. Kersey. 


141 


up Endorsements.’ As these forms will not be used for some 
time yet to come, approval has been withheld.” 

(Paper marked Exhibit 25.) 

By Mr. Mayer: 

Q. The next one submitted is what? A. (Reading) “ Yew 
T ork Standard Life Insurance Policy. Three Sub-standard 
forms: ‘ Ordinary Life ’, ‘ Limited Payment Life ’, ‘ Endowment ’, 
These forms have been approved.” 

Q. That was submitted by the Committee of Actuaries ? A. 

Yes. 

Mr. Mayer.— I offer it in evidence. 

(Marked Exhibit 26.) 

Q. The next submitted by the Committee of Actuaries is what ? 
A. (Reading) “ Yew York Standard Life Insurance Policy. 

* Pure Endowment with. . ( .return of premiums ’. This 

form has been approved.” 

Mr. Mayer.— I ask to have that marked. 

(Marked Exhibit 27.) 

Q. The next submitted by the Committee of Actuaries is what ? 
A. (Reading) “Yew York Standard Life Insurance Policy. 

‘ Single Premium Endownment.’ This form was approved.” 

Mr. Mayer.— I offer that. 

(Marked Exhibit 28.) 

Q. The next submitted bv the same committee is a certain form 
of supplementary agreement. Tell us about that? A. (Read¬ 
ing) “ Yew York Standard Life Insurance Policy. ‘ Supple¬ 
mentary Agreement ’ for use in connection with ‘Additional Mode 
of Settlement.' This form was not allowed.” 

Mr. Mayer.— I ask to have that marked. 

(Marked Exhibit 29.) 

Q. The next form submitted by the same committee is an ad¬ 
ditional mode of settlement? A. (Reading) “ Yew York Stand¬ 
ard Life Insurance Policy. ‘Additional Mode of Settlement.’ 
This form is not approved.” 

Mr. Mayer.— I ask to have that marked in evidence. 

(Marked Exhibit 30.) 

Q. The next submitted by the Committee was what ? A. 
(Reading) “ Ye w York Standard Life Insurance Policy. ‘ Four 
additional clauses ’ for ‘ return premium ’ policies. These forms 
were not approved.” 








142 


Senate Judiciary Committee. 


Mr. Mayer.— I would like to have that marked. 

(Marked Exhibit 31.) 

Q. The next submitted by the same committee relates to cer¬ 
tain Annuity forms. Tell us about that? A. (Reading) “ New 
York Standard Life Insurance Policy Forms. 1 Life Annuity/ 
i Temporary Annuity/ 1 Deferred Annuity/ ( Joint and Survivor 
Annuity/ 1 Survivorship Annuity.’ These forms were approved.” 

Mr. Mayer.— I ask to have these marked. 

(Marked Exhibit 32.) 

Mr. Hatch.— I desire to state to the Committee that there are 
just 30 of those, instead of 34. 

By Mr. Hatch: 

Q. How many did you promulgate out of this whole number ? 
A. Thirteen. 

Q. And were they promulgated ? A. They were. That is 
they were approved. • There is no requirement that they shall 
be promulgated as standard forms. 

Q. Did you adopt the form to show Avhat had been adopted ? 
A. Yes, sir. 

Q. Did you issue a circular in connection with that ? A. I 
did. 

Q. I will go back a little. Mr. Kelsey upon these policies, 
did you give a notice of a hearing ? A. I did. 

Q. I show you a paper. Is that the notice ? A. It is, 

Q. Read it. A. (Reading) “ Mr. John Napier, Secretary 
Bankers Life Insurance Company, No. 31 Nassau street, New 
York city. Dear Sir: In accordance with the provisions of sec¬ 
tion 101 of the Insurance Law you are notified that on Thurs¬ 
day, December 27, 1906, at 11 o’clock A. M. at the office of the 
Department, No. 11 Broadway, New York city, there will be a 
hearing on certain proposed forms of Life Insurance policies. 
Respectfully Yours, Otto Kelsey, Superintendent.” 

Q. Now was that notice sent to each one of the other com¬ 
panies ? A. Each Life Insurance Company, mutuals. 

Q. Did you have a meeting pursuant to that notice. A. We 
did. 

Q. Where? A. At the Department office, No. 11 Broadway, 
New York. 

Q. On what date? A. December 27. 



Testimony of Mr. Kersey. 


143 


Q. Who were present ? A. Representatives from a large num¬ 
ber of Life Insurance Companies. 

Q* ^ eie minutes of that meeting kept. A. There were. 

# Q- 1 sllow L ou a paper: What is that? A. These are the 
minutes. That states the appearances. 

Mr. Hatch. I desire to offer those minutes in evidence and 
to have them spread on the record. 

(Paper marked Exhibit No. 33.) 

Q. Can you state from that paper, Exhibit No. 33, Mr. Kel- 
sey, the number of persons who were present at that meeting, 
vho participated in it, and who they were? A. Ho you wish me 
to give the names ? 

Q. Yes, just read the minutes there, A. (Reading) “ State 
of New York—-Insurance Department. Before Hon. Otto Kel¬ 
sey, Superintendent of Insurance, 11 Broadway, New York, 
December 27, 1906. 

Mr. John S. Paterson, Chief Actuary. ♦ 

Senator William W. Armstrong, Counsel. 

Hearing at 11 o’clock A. M. upon proposed policy forms other 
than standard life, limited payment life, endowment, and term 
policies. 

Appearances: 

Joel G. Van Cise, Actuary, The Equitable Life Assurance 
Society. 

Gage E. Tarbell, Second Yice-President, The Equitable Life 
Assurance Society. 

Eugene Van Sehaick, Gen. Counsel, Bankers Life Ins. Co. 

William A. Hutcheson, Associate Actuary, Mutual Life Insur¬ 
ance Company. 

William R. Malone, Postal Life Insurance Company. (Life 
Insurance Club.) 

George D. Eldridge, Vice-President and Actuary, Mutual Re¬ 
serve Life Insurance Company. 

D. S. Dickinson, Actuary, Security Mutual Life Insurance 
Company. 

James M. Craig, Actuary, Metropolitan Life Insurance Co. 

John Euhrer, Actuary, Germania Life Insurance Co. 

H. P. Townslev, President, Life Association of America. 


144 


Senate J,udiciaky Committee. 


Henry Moir, Actuary, Provident Savings Life Assurance So¬ 
ciety. 

Arthur Hunter, Actuary, Hew York Life Insurance Co. 

G. L. Plumley, Actuary, Washington Life Insurance Company. 

George W. Hubbell, Actuary, United States Life Insurance 
Company. 

Haley Fiske, Vice-President, Metropolitan Life Insurance Com¬ 
pany. 

William A. Marshall, Vice-President and Actuary, Home Life 
Insurance Company. 

John G. Milburn, Counsel, Metropolitan Life Insurance Com¬ 
pany. 

- Marshall, Liberty Insurance Company. 

Those additional forms which have received the endorsement 
of the Committee of Actuaries were the first to be considered. 

Mr. Moir, Secretary of the Committee, explained and sub¬ 
mitted ten annuity forms, five policy forms, six riders and five 
additional clauses. 

Mr. Van Cise, The Equitable Life Assurance Society, pre¬ 
sented two forms of continuous instalment policies. 

Mr. Craig, Metropolitan Life Insurance Company, submitted 
three special policy forms. 

Mr. Haley Fiske, Vice-President, Metropolitan Life, spoke in 
favor of the forms submitted for his company. 

Mr. Moir, Provident Savings Life, presented one special form ' 
of term and renewal life. 

Mr. Hunter, Hew York Life, presented three forms of under 
average policies. 

Mr. Dickinson, Security Mutual, Mr. Van Cise, The Equitable 
Life, Mr. Malone, Postal Life Insurance Company and Mr. Mar¬ 
shall, Liberty Life Insurance Company, spoke in favor of cer¬ 
tain forms. 

Mr. Paterson presented five special policy forms of the Buffalo 
Life Insurance Company. 

Hon. John G. Milburn, Counsel for the Metropolitan Life In¬ 
surance Company, spoke in favor of its special forms. 

Mr. Tarbell spoke in favor of the continuous instalment con¬ 
tract. 

Hearing adjourned, 1 :30 P. M.” 

I might say that I was there at the conference with Mr. John 
S. Paterson, the Chief Actuary, and Senator Armstrong, counsel. 



Testimony of Me. Keyset. 


145 


Q. Did you have a conference with Senator Armstrong prior to 
that meeting? A. Yes. 

Q. Where? A. I think the first was in Rochester. 

Q. What was it? A. Stating to him that the additional forms 
were to be considered and that I hoped he would sit and advise me 
as counsel at the hearing. 

Q. W hat reply did he make to that? A. After a few moments 
of talk he said he would. 

Q. Did he appear at the hearing? A. Yes, sir; he did. 

Q. And participate in the discussion? A. Yes, sir; took part 
in the discussion. 

Q. After that hearing what did you do ? — that is, were the 
people mentioned in that record heard upon that subject? A. 
They were. 

Q. ITow long did the conference last ? A. Three hours I should 
think. I think it was from eleven until towards two. It may have 
been a little later. 

Q. And the subject matter was pretty fully discussed? A. It 
was. I called on the representatives of each company separately 
for the presentation of forms, and then we took up the forms 
suggested and the reasons and purposes of them were discussed. 

Q. And they responded as each company was called ? A. Those 
who cared to. 

Q. After the public hearing was finished, what did you do ? A. 
Senator Armstrong and Mr. Paterson and myself — well, Mr. 
Hunter, my Hirst Deputy, was there also — they departed and we 
remained until time for the train by which Senator Armstrong 
left in the evening, discussing the matter and going over the de¬ 
tails and looking at the verbiage. 

Q. You say Senator Armstrong was there? A. Yes, sir; as 

counsel. 

Q. And Mr. Paterson the Chief Actuary and Mr. Hunter? A. 

Yes, sir. 

Q. What did you do ? A. There was first a discussion to de¬ 
termine whether we had authority under the statute to allow addi¬ 
tional forms. In the course of that I stated my conclusions to he 
that we ought not, and I thought should not add to the four stand¬ 
ard forms from the amendments proposed by the life insurance 
companies for particular additions. There was very little ques¬ 
tion about the forms presented by the Actuarial Society as most of 
i hem were not in conflict with the four standard forms. There 
10 




146 


Senate Judiciaky Committee. 


were the -united and sub-standard and other forms not approved in 
the four standards. 

Q. Did Senator Armstrong and Mr. Paterson or anybody object* 
to the principle you proposed to apply ? A. They did not. We 
were in accord. I may state that I asked Mr. Armstrong to assist 
for the reason that as head of the Armstrong Committee and. hav¬ 
ing drafted the statute, from the Committee’s standpoint he was in 
touch or knew the details on which they drew, so that I would get 
the advantage of his knowledge. There was nobody else in the 
State so well able to take up the matter and advise me as tne 
Senator. 

Q. And you desired to apply this law and carry it out as far as 
you could, get the intent of the Legislature from its terms, aided 
by those who had been instrumental in its adoption ? A. I did. 

Q. Is that what induced you to consult Senator Armstrong? 
A. Yes, sir. 

Q. And you knew he was a man of ability ? A. I did. And in 
this matter he was valuable to me in reducing the number of forms 
we finally allowed, by consolidating three or four forms into one 
and putting in parentheses the changes in language which would 
be authorized for the variation of contracts. 

Q. That is you took several of these policies and with the aid of 
the Senator put them into one form ? A. Yes, sir, with explana¬ 
tions in parentheses, and in that way dispensed with several differ¬ 
ent forms. 

Q. So really in that way you had all that was good in several of 
these policies put into one ? A. We did. 

Q. I understand you, Mr. Kelsey, to say that principle you had 
adopted you had announced, and that met the approval of Senator 
Arsmtrong ? A. Y es, sir. I think that was mentioned in our 
Rochester talk, that it was a doubtful question. 

Q. How did you have any conversation with Senator Armstrong 
after these policies were promulgated ? A. You mean after they 
had been approved ? 

Q. Yes. A. I did. 

Q. Where? A. Here at the Capitol. 

Q. What was it ? A. After the Senate had adjourned one week, 

I asked him il he would sit down with Mr. Paterson and myself 
and review the printed forms as we had adopted them and were 
about to approve; and he said there was no objection, and he 
fixed an hour and at the hour fixed Mr. Paterson and I took the 


Testimony of Mr. Keilsey. 


147 


forms and went to the room where he was and spent an hour there 
going over them. 

Q. When was that? A. After the Legislature was in session, 
after the first of J anuary, 

Q. This year? A. Yes, sir. 

Q. Did the Senator express his approval of the forms ? A. I 
think he did. There was no express disapproval. We were look¬ 
ing them over, and there was no time to go over the detail, hut 
there was a general review of the work as Ave had put it into the 
printed proof. 

Q. And he raised no objections to the work as it then existed? 

A. Oh, no. 

Q. Out of this Avhole number of forms which I have, amount- 

• ' 

ing to thirty in all, how many different forms were evolved ? A. 
Thirteen. 

Q. And those thirteen forms were the subject of examination 
with Senator Armstrong of which you spoke ? A. Yes. 

Q. What identifies these forms herel A. We call them the 
additional forms. 

Mr. Mayer.— I offer these papers in evidence. This package 
contains the thirteen additional policy forms as finally approved 
by the Superintendent. 

(Marked Exhibit 34.) 

Q. What is this paper I iioav hand you ? A. It is a memo¬ 
randum of the additional forms of life insurance policies ap¬ 
proved. 

Q. Just read it? A. (Reading.) 


Date. 

Jan. 24. Y. Y. State Cos. 


Jan. 28. Other State Cos. 
Ins. Press et al. 
Ins. Depts. 

Feb. 6. Y. Y. State Cos. 


\ 


Ordinary Life, Limited Payment 
Life and Endowment Sub-stand¬ 
ard policies — 2 each. 

Ordinary Life, Limited Payment 
Life and EndoAvment — 1 each 
and 1 circular letter. 

1 Life Annuity Single Premium, 

2 Deferred Annuity, 

3 Joint and Survivor Annuity, 

Single Premium, 

4 Temporary Annuity, 

5 Yearly Renewable Term — 

2 policies and 2 circular 
letters. 






148 


Senate Judiciary Committee. 


Date. 

Feb. 7. Other States 
Ins. Press 
et al. 


Feb. 8. Ins. Depts. 


I 


Feb. 9. R. Y.. State 
Cos. 


Feb. 12. R. Y. State Cos. 

Feb. 12. Other States. 

Ins. Depts. 

Ins. Press 
et al. 



1 Life Annuity Single Premium, 

2 Deferred Annuity, 

3 Joint and Survivor Annuity, 

Single Premium, 

4 Temporary Annuity, Single 

Premium, 

5 Yearly Renewable Term, 

1 policy each. 

1 Life Annuity, Single Pre¬ 

mium, 

2 Deferred Annuity, 

3 Joint and Survivor Annuity, 

Single Premium, 

4 Temporary Annuity, Single 

Premium, 

5 Yearly Renewable Term, 

1 policy each. 

1 Survivorship Annuity with 

Return Premium, 

2 Single Premium Life, 

3 Single Premium Endowment, 

4 Pure Endowment, 

2 policies each. 

Ordinarv Joint Life, 

2 policies each, 

1 Survivorship Annuity with 

Return Premium, 

2 Single Premium Life, 

3 Single Premium Endowment, 

4 Pure Endowment, 

5 Ordinary Joint Life, 

1 policy each. 


Q. Row I show you a paper, Mr. Kelsey, and ask you what 
it is? A. This is the circular issued by me as Superintendent 
showing the standard forms of policies additional to those pre¬ 
scribed. It relates to those already referred to. 

Mr. Hatch.— I desire to have that read into the minutes. 

The Witness.—• (Reading) : 

“ Standard Forms of policies additional to those prescribed in 

section 101 of the Insurance Law. 



Testimony of Mr. Keesey. 


149 


Section 101 of the Insurance Law which prescribed four forms 
of standard policies which 'shall be issued or delivered within 
this State by any domestic life insurance corporation on and 
after the first day of January, nineteen hundred and seven, also 
provides that — ‘ Whenever any domestic life insurance corpora¬ 
tion shall desire to issue or deliver within this State any kind 
of policy other than ordinary life, limited payment life, en¬ 
dowment and term policies, it shall submit a proposed form of 
policy to the Superintendent of Insurance who shall thereupon 
fix a day for a hearing upon said application and cause notice 
thereof to be given to every domestic life insurance corporation; 
and the Superintendent may after such hearing approve the said 
form with or without modifications thereof as may seem to him 
expedient and establish the same as a standard form of policy 
which any domestic life insurance corporation shall be entitled 
to use in addition to the forms hereby prescribed.’ 

In accordance with this provision of the section a hearing was 
held at the Hew York office of the Department on December 27, 
1906, at 11 o’clock a. m. A number of policy forms were sub¬ 
mitted bv a Committee of Actuaries, members of the Actuarial 
Society of America, and also by certain life insurance companies. 
Several of the proposed forms were upon consideration believed 
to be of a character included within the standard forms prescribed 
by the statute, and others were so evidently not in harmony with 
the spirit of the Insurance Laws, that the Superintendent of In¬ 
surance felt that he was without power to approve or modify the 
same and authorize their use as additional forms of policies. Of 
the forms submitted the following have been approved for use in 
addition to the forms prescribed in the section: 

Life Annuity. 

Temporary Annuity. 

Deferred Annuity. 

Last Survivor Annuity. 

Survivorship Annuity. 

Pure Endowment. 

Ordinary Joint Life Insurance. 

Paid-up Life Insurance. 

Paid-up Endowment. 

Yearly Renewable Term. 

Sub-standard forms of Ordinary Life. 

Limited Payment Life and Endowment. 



150 


Senate Judiciary Committee. 


In order that companies may begin printing these forms at the 
earliest date possible it has been determined to mail them to all 
concerned as they are 1 received from the printer, lathei than 
delay some of them until all are ready. 

OTTO KELSEY, 

Superintendent of Insurance. 

Insurance Department, Albany, H. Y.” 

Q. Who framed that circular ? A. It was drafted by the 
Chief Actuary, brought to me and approved by me and then put 
into type. 

Q. In the ultimate determination as to these policies to which 
attention has been last called, whose judgment finally determined 
what should be their form ? A. My own. 

Q. That is you took counsel with all these people ? A. I got 
all the information I could 'from experts and counsel and from 
the insurance companies,— every source. 

Q. And then you exercised your independent judgment ? A. I 
did. 

Q. Following the statute as you understood it ? A. Yes. 

Q. Did you have any consultation in respect to the circular 
with Senator Armstrong ? A. I think not. I do not recollect it. 

Q. Do you recollect at any time of consulting him with respect 
to it and getting his approval of it ? A. I do not recall it now. 

By Senator Armstrong: 

>» 

Q. Mr. Kelsey, was not that the form which was present at 
the consultation had in the Finance Committee room? A. Yes, 
you are right; the circular was there, a draft of it. 

Mr. Hatch.— (Resuming). 

Q. And this is the form which was examined into and approved. 
A. Yes, sir. 

Q. And were there mutual suggestions as to its terms ? A. Yes, 
sir. 

Q. We have mentioned Mr. Dawson heretofore. It does not 
appear as fully as I would like to have it what his relation was 
to the Armstrong Committee. A. Consulting actuary, as I un¬ 
derstood it, 

Q. And do you know when he began to occupy that position ? 
A. When the committee organized. 

Q. And he continued until what time ? A. Until its dissolution 
as I understand. 




Testimony of Mr. Kelsey. 


151 


Q. And as you understand it was he the actuary who advised 
the committee? A. I knew it. 

Q. Did you have any communication from him with respect 
to standard forms of policies? A. I did. 

Q. A hen ? A. It was I think early in September. 

Q. 1 show you a letter. What is that ? A. This is a letter 
dated September 10, 1906. 

Mr. Hatch.— I desire to read this into the record: First I 
will have it marked in evidence. 

(Paper marked Exhibit Ho. 35 and is as follows:) 


k ' Hon. Otto Kelsey, 

Superintendent of Insurance, Albany, N. Y. 

Dear Sir: The Committee of Actuaries of the Hew York com¬ 
panies have furnished me with a copy of the brief they have filed 
with you together with suggested changes in the Hew York stan¬ 
dard life insurance policies. 

These changes appear to have been made strictly within the 
lines laid down by the committee and in accord with the spirit 
of the policy. They are evidently not intended to be captious, 
or materially change the contract. The work has been conscien¬ 
tiously done in every respect. 

It appears unwise, however, to consent to any changes which 
are not actually required in order to make the meaning clearer, 
and still I have no special objection to such changes, if you think 
it wise to make them. I recommend on this account the follow¬ 
ing changes be not concurred in: 

The changes in the language relating to the ‘ deduction of 
unpaid portion of premium. 7 The case when an entire premium 
has not been paid, is fully covered by the ‘ grace clause 7 and 
there is no reason to alter this language. 

The change of 1 whenever 7 to ‘ when 7 in the ‘ change of bene¬ 
ficiary 7 provision. 

The change of ‘time ’ to ‘ month 7 in the ‘ grace clause. 7 

The change £>f ‘ payable 7 to ‘ paid 7 in the ‘ dividend 7 provision. 

The change of “ given 7 to ‘ mail 7 in the ‘ loan 7 provision. 

The insertion of the word ‘ either 7 in the ‘ surrender or lapse 7 
provision. 

The substitution of ‘ without further participation 7 for ‘ with¬ 
out participation 7 in the same provision. 

The substitution of Mater 7 for ‘ other 7 below the ‘ Table of 
Loan and Surrender Values. 7 . 


152 


Senate Judiciary Committee. 


The insertion of i either 7 in provision 2, on surrender 01 
lapsed 

The substitution of ‘ executors, administrators 7 for ‘ legal 
representatives 7 in provisions 1 and 3, on ' modes of settlement. 

The substitution of ' contract guaranteeing for 1 agreement 
ford 

In every case I think that these changes are not called for by 
any necessity for alteration in the language, and on the basis, 
that the work of the Legislature should not be interfered with 
except for some good reason I recommended that these changes be 
not made. 

The change in the 6 promise to pay 7 clause on first page from 
‘ after deducting any indebtedness 7 to ‘ less any indebtedness 
hereon 7 seems to be a good one and the elimination of the final 
( y 7 in 1 beneficiary 7 in order that beneficiaries may be written 
in, is not in the slightest degree objectionable. 

The substitution in the ‘ change in beneficiary 7 provision of 
1 any 7 for ‘ the 7 would not be so good, I think, as the substitu¬ 
tion of ‘ a 7 instead of ‘ any. 7 

I recommend-that the language substituted for ‘ and if no bene¬ 
ficiary shall survive the insured, the policy shall be payable to the 
legal representatives of the insured 7 be stricken out and the 
original language be continued for the following reasons: 

As written, the language admits of three forms of designation 
of more than one beneficiary, viz.: of joint beneficiaries; the nom¬ 
ination being defeated by the death of any one, in which case 
if any one has died ‘ no beneficiary will have survived the in¬ 
sured 7 (2) The nomination of two separate beneficiaries, share 
and share alike, in which case, if one beneficiary dies, as to that 
portion of the benefit, ‘ no beneficiary will have survived the in¬ 
sured, 7 and (3) Jointly and severally, in which case ‘no bene¬ 
ficiary will have survived the insured, 7 only in case all the benefi¬ 
ciaries designated shall have died. The change which the 
Committee suggests, would accommodate only the one case of the 
nomination of a number of beneficiaries, share mid share alike, 
in severalty, which I have pointed out is clearly accommodated 
by the original language and the other two modes permitted like¬ 
wise. 

Under ‘ payment of premiums, 7 there is no objection to per¬ 
mitting the company to recite the titles of the executive officers, 
nor is there objection to the change of grace period to one month 
instead of thirty days, and the charge of interest during the grace. 


Testimony of Mr. Kersey. 


153 


Under conditions as I understand the original form, it would 
permit only of language which would void the policy in case 
death during the first year was caused by one of these things, 
while under the changed wording, it will permit the voiding of 
the policy, no matter when death occurs, if these restrictions 
have been violated during the first year. I think your action on 
this matter should depend upon which of these in your judgment 
should be enforced, and also upon whether the f incontestable ’ 
provision will after one or two years shut out the refusal to pay 
because of violation of these restrictions during the first year. 
I leave the question of military or naval service in time of war 
to be made exceptions without comment. It was not the intention 
of the Armstrong Committee or the Legislative Committee, that 
they should be, but it may be wise to permit it. 

Under the head of ‘ Dividends 9 the change of ‘ holder 9 to 
1 owner ’ is unobjectionable, but I think the words ‘ of this policy 9 
need not be employed, though there is no special reason why they 
should not be if it is thought that they make the meaning clearer. 

Under the head of ‘ Loans ’ the striking out of the word 
* after ? seems to me to make the meaning clearer and the inser¬ 
tion of the word ‘ hereon ’ is also unobjectionable. The other 
proposed changes I think should all be omitted and for the 
following reasons: 

As the provision stands the company cannot cancel on failure 
to repay the loan or interest until the indebtedness exceeds all the 
unpaid dividends and accumulations and a certain percentage 
named by the company, but not less than 80 per cent, of the net 
value of the policy and all additions. This leaves the Kew York 
companies free to name any percentage higher than 80 per cent, 
that they may desire, and several of the companies whose actuaries 
were co-operating intend to name a higher percentage than 80 per 
cent, as their limit of loan. If they were to do so in the ‘ Loan 9 
column of the table, as soon as such a loan had been made, all 
protection to the policy-holder because of this provision would 
be removed and the company could (having taken a note for a 
year), upon failure to repay, void the policy. Section 88 does 
not provide for a cash surrender value at all, but merely provides, 
that a certain amount shall be applied to purchase a surrender 
value of another character, which is a very different thing. 

It is no argument to say, that the company may not. wish to 
loan 80 per cent., especially in the earlier years. It does not need 


154 


Senate Judiciary Committee. 


to loan 80 per cent.; but the policy-holder is protected against the 
wiping out of his policy because of failure to pay a loan until his 
total indebtedness is equal to not less than 80 per cent. Thus, 
suppose the company lent 50 per cent, the third year and did not 
lend 80 per cent, until the seventh or eighth year, or later, if the 
language is left as it was, all it would do is this: to protect the 
policy-holder against cancellation for failure to pay the 50 per 
cent, loan made in the third year, or interest upon the same 
(but meanwhile paying premium, because otherwise the policy 
would become ■ void in any case except as to its net surrender 
value), unless the accumulation of indebtedness amounted to 80 
per cent, of the value at the seventh or eighth year for instance. 

I must not omit mentioning also that the original provision 
protects the policy-holder by requiring all unpaid dividends and 
accumulations to be absorbed by the loan before non-payment can 
void the policy. 

Left as it was this language gives a wide measure of liberality 
with safety for policy-holders so far as voiding the policy is con¬ 
cerned, to the Yew York companies, in the matter of loans. 
Changed as requested, it would practically read into the law a 
fixed limit for loans and would surely cripple Yew York com¬ 
panies in competition, unless, as stated, they destroyed this pro¬ 
tection for the policy-holder entirely by making loans from the 
outset, higher than the value applied upon surrender under 
section 88. 

The change of thirty days to one month would not be objection¬ 
able and I do not think that there is any serious objection to 
providing for the mailing of notice, if you prefer it, although the 
law is very distinct and clear already as to this method of sending 
notices. 

1 nder the head of 1 Options on Surrender or Lapse ’ I leave the 
question as to whether the words ‘ prior to any default or > should 
be stricken out or not, entirely to your judgment without recom¬ 
mendation, merely citing the following arguments pro and con. 

Tn favor of striking out: The argument that it will prevent the 
ownei from suffering the loss of the insurance up to the end of the 
policy year by surrendering it at an earlier date. 

In opposition to striking out: That it deprives the policy-holder 
of the privilege of surrendering his policy until he is in default. 

The addition of * without the right to loans ’ is not objection¬ 
able, and these words should be added to the words ‘ without par¬ 
ticipation ’ in the original. 


Testimony of Mr. Keilsey. 


155 


Tlie change of the language, however, from 1 at its full amount 7 
to a much larger expression, which means the same thing, is, I 
think, unnecessary. The insertion of the word ‘ non-participat¬ 
ing 7 and the striking out of all except as to ‘ payment 7 of pre¬ 
miums and participation is, I think, unnecessary. The inser¬ 
tion of the word ‘ life 7 is not objectionable and may make the 
meaning somewhat clearer. The striking out of the word e mini¬ 
mum 7 in two places is also not objectionable. 

Under the head of ‘ Table of Loans and Surrender Values. 7 
the language giving the company the right to print in the values 
for $1,000 and to provide for its being as many times that amount 
as are the number of thousands of dollars insured, is not 
objectionable. 

In the headings of the table the addition of the word ‘ life 7 is 
not objectionable. 

The striking out of the words ‘ on the same basis 7 at the 
bottom of the table should not be consented to. If these words 
are stricken out the policy-holder has no assurance that the values 
to be given beyond the twentieth year will be computed on so 
favorable a basis as the values given before the twentieth year. 
He should have this assurance. 

I recommend that you do not consent to the striking out of the 
figures 1 and 2 in the year column. If you were to do so 
then the company which desired to give loans and other values at 
the end of the first and second years would apparently have no 
right to do so. I see no reason why companies which do not give 
these values should not show that fact by drawing lines through 
the corresponding spaces. 

I do not see any reason to object to any of the changes in pro¬ 
vision 2, excepting the insertion of the word e either 7 which has 
already been referred to. I do not think the changes alter the 
meaning, but I do think that they make the meaning a little 
clearer. 

The changes in the final paragraph on page 2 do not alter the 
meaning, but they clear up a possible ambiguity and I recom¬ 
mend that they be consented to. The only other change is by the 
omission of ‘ by written application therefor at the home office of 
the company, 7 which I think ought to be consented to, because 
some companies authorize branch offices and others to receive 
these applications. 

The change at the top of page 3 from ‘ in case the insured 
should not have elected 7 to ‘ in case the insured shall have made 


156 


Senate Judiciary Committee. 


no election ’ is not one which is called for in order to make the 
meaning clearer, and I recommend that it he not consented to. 
The striking out of the word 1 may ’ in one place and putting it 
in in another also does nothing to make the meaning clearer and 
is besides, not so good English, parting the two verbs instead of 
bringing them together. The substitution of the word ‘ total ’ 
for the word ( net ’ does make the meaning clearer and should be 
consented to. 

The use of the word t end ’ in provision 3, was intentional, 
but there is no objection to the substitution of the word ‘ begin¬ 
ning/ if it is more satisfactory to the companies. 

The provision for a surrender of the policy and the giving of a 
supplementary contract if one of these options is elected, is satis¬ 
factory, except, that I think language should be inserted to the 
effect, that this surrender is upon maturity of the policy by the 
insertion of the words ‘ upon the maturity of this policy’ after 
the word ‘ surrender.’ Otherwise, it might be understood that 
the policy must be surrendered when the option is elected. 

There is no objection to the striking out of the words ‘ an 
annuity or ’ in the final provision on this page, and on the ground 
that a beneficiary might with the intention to commif suicide, 
surrender his benefits for a commuted value, while still in good 
health, I am led to recommend, that the substitution of ‘ except 
after the death of the beneficiary occurring within the aforesaid 
20 years ’ for ‘ unless the good health of the beneficiary is shown 
to the satisfaction of the company be accepted. I do not think 
that any serious injury will be done by making this modifica¬ 
tion. 

The changes in the heading of the i Table of Instalments ’ do 
not alter the meaning, and do make it clearer, I think. 

The language ‘ no person except an executive officer of the 
company as aforesaid, has power to modify this policy, or to ex¬ 
tend the time for paying a premium ’ was purposely omitted, 
and I do not think it ought to be inserted. The claimant cannot 
recover in any event, unless he can prove affirmatively that the 
policy has been modified by a person authorized to do so, or pos¬ 
sessing that power under the law, or in case of default of pre¬ 
mium, unless the extension of the time of payment was made by 
some person having power to extend the time. lie should not be 
estopped from providing this if such is actually the case, by lam 
guage in the contract, 


Testimony of Mr. Kelsey; 


157 


In the main, the changes suggested will aid to perfect the 
Standard Policy form and some of the most important of them 
certainly should be consented to. A few, as I pointed out, would 
render the form less perfect than it is at present, and a consider¬ 
able number would do nothing toward perfecting the form and 
would merely be unnecessary changes which on that account ought 
not to he consented to. 

Respectfully submitted, 

MILES M. DAWSOH, 

ConsuKing Actuary.” 

Q. What use did you make of that letter, Mr. Kelsey ? A. I 
followed the same course as with the actuaries’ brief. I took the 
forms and went over them in detail with the suggestions Mr. 
Dawson made, to see what the effect would be, and whether I 
should agree or disagree with his view. 

Q. Did you adopt all of his suggestions ? A. I did not. 

Q. Did you adopt any of them ? A. I did. 

Q. Can you state what proportion you adopted? A. Ko, I 
could not now. There were some I thought were very good, and 
I made the change, t hey did not seriously affect the forms; it 
was to perfect the language and clear it up. 

Q. Where you thought it improved the policy you used his 
recommendations ? A. Yes, sir. I think there were several. 

Q. Did you receive another letter ? Did you communicate with 
Mr. Daw r son after the policies were promulgated ? A. I did. lie 
is one of the men to whom I sent a copy of the forms as approved 
and promulgated. 

Q. Do you recollect when that was ? A. The first of October 
they were promulgated. 

• Q. And then did you receive a reply from Mr. Dawson ? A. I 
did. 

Q. What is the paper I now show you ? A. It is a letter I 
received from Mr. Dawson. 

Q. Please read that letter. A. “ Toronto, Ontario, October 4, 
1906. 

“ Hon. Otto Kelsey, 

Superintendent of Insurance, Albany , N. Y.: 

Dear Mr. Kelsey.—-1 thank you for your favor of the 2d and 
for forwarding copies of new standard forms to the various ad¬ 
dresses as per my request. I have gone over the forms casually 



158 Senate Judiciary Committee. 

and so far as I can observe there is but one tiling which to any 
important degree you have varied from what the Committee de¬ 
liberately intended, viz.: It was the intention of the Committee 
after their discussion of the matter, the opposite position having 
been presented by a committee of actuaries, to have the change of 
beneficiaries take effect upon the filing of notices, thus leaving it 
the act of the owner of the policy and not the act of the company 
by making an endorsement. 

Thanking you again for your kindness, I am, 

Yours sincerely, 

MILES M. DAWSOH.” 

Q. Was that the last letter you received from him upon that 
subject? A. Yes, sir. 

Q. And was there any further communication between you and 
him? A. Hot ivpon that subject. 

Q. Hot upon that subject. A. Ho. 

Q. Did you have any communication with Mr. Dawson with 
respect to the special form of policy ? A. I did. The additional 
forms we called them. 

Q. I show you certain papers; what are those ? A. This is a 
letter from Mr. Dawson under date of December 7, 1906. 

Q. And is that the date it was received ? A. It was received 
December 8th; it has our office stamp as having been received 
December 8th. 

Mr. Hatch.— I desire to offer that letter in evidence. 

(Paper received and marked exhibit Ho. 37, and is as follows:) 

“ Hon. Otto Kelsey, 

Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— Several companies will shortly petition you to 
standardize forms of policies to be known as ‘ preliminary term.’ 
Their action in presenting the petition has been delayed somewhat 
by the desire to obtain and submit to you at the same time as part 
of the argument in favor of such standardization the report of the 
committee of fifteen which met at Chicago, which report I am 
now advised will be ready, and copies of it in my hands by 
Saturday or Monday. I think, therefore, that the petition will 
go forward on Monday. 

I am advising you of this in order that if possible you may take 
into account the fact that this petition is coming to you, in fixing 


Testimony of Mr. Kelsey. 159 

your date for hearings upon the various suggestions for standard¬ 
ization of forms. 

Yours sincerely, 

MILES M. DAWSON.” 


“ December 10, 1906. 

Mr. Miles M. Dawson, 

Consulting Actuary , 76 William street, New York City. 

Dear Sir. 'Your favor of the 7th inst. with enclosure relating 
to ‘ preliminary term ’ or ‘ premium reduction ? policies, has been 
received. 

The hearing on proposed policy forms will probably be held the 
latter part of this week. 

Respectfully yours, 

OTTO KELSEY, 

Superintendent.” 

ci Hon. Otto Kelsey, 

Superintendent of Insurance, Albany, N. Y. : 

Dear Sir.— We, the undersigned, petition you to standardize 
the forms of policies to be known as ‘ premium reduction ’ to be 
applied to all the usual forms with annual premiums, viz.: 

‘ Ordinary life premium reduction/ 

‘ Limited payment life premium reduction/ 

‘ Endowment premium reduction / 

‘ Term premium reduction / 

The forms to differ from the usual forms only by substituting 
in the second line of the consideration clause in each of these 
forms, the folio wins*: ‘ / instead 

of ‘ a like amount/ the intention being that the company will be 
privileged to write into this blank space the language necessary 
to express the sum or sums payable as a consideration after the 
payment of the first premium. 

While it is our intention to write this policy upon non-partici¬ 
pating plans, we do not ask that it be standardized only for such 
plans. 

The necessity for the standardization of such forms arises from 
two considerations, viz.: First, the limitation of expenses for the 
first year of insurance, according to section 97 of the Insurance 
Law, which bears especially heavily upon companies doing a non¬ 
participating business; and second, the announced intention of a 


100 


Senate Judiciary Committee. 


large foreign insurance company to issue only non-participating 
insurance after this year, largely upon the ‘ premium reduction ’ 
plan. 

Respectfully submitted this 7 th day of December, 1906. 

Life Insurance; Ceub of Yew York, 

By Miles M. Dawson, Consulting Actuary. 

The Liberty Life Insurance Company of ISTew York, 

By Wm. Ives Washburn, Attorney. 

The United States Life Insurance Company in the City 

of Yew York, 

By George W. Hubbell, Attorney. 

Provident Savings Life Assurance Society of Yew York, 

By Henry Moir, Attorney.” 

Q. After the receipt of that letter, Mr. Kelsey, did you have any 
conversation with Mr. Dawson ? A. I think not until after the 
conference. 

Q. Well, after the conference did you have a conversation with 
him with respect to that subject? A. Mr. Dawson was not at the 
conference, but representatives of the Postal Company were; that 
is the company for which he had written this letter. 

Q. Did you have any conversation with him subsequently ? A. 
Over the ’phone. 

Q. What was that ? A. I was called to the ’phone one day 
and the man at the other end said he was Mr. Dawson. He asked 
if the decision had yet been made in relation to the additional 
forms asked for by the Postal Company. I said to him that the 
decision had not been formally entered, the policies not having 
yet been printed; but my conclusion was against the allowance of 
that form. He said he was very much surprised because it seemed 
to him a very necessary form for that company in its conditions, 
and that it was desirable for policy-holders. I repeated to him 
what I have said here, that my determination was not to allow 
additional forms which would conflict with the four standard forms 
already covering the same kind of insurance. He said the Arm¬ 
strong Committee had never intended such a close construction of 
the statutethat I was at liberty to allow any forms that seemed 
proper and necessary in the transaction of business. I told him I 
could not say from my own knowledge as to the understanding of 
the Armstrong Committee, but I felt reasonably sure as I had 
asked Senator Armstrong to act as counsel, and he had concurred 


Testimony of Mr. Kelsey. 


161 


with me in the decision I had made. He wanted to know if it 
were possible that Senator Armstrong took the position; I told 
him he certainly did as far as I understood. He asked if I had 
any objection to his writing to Senator Armstrong. I had not the 
slightest. That was the extent of our conference. 

Q. Did you have anything further from him after that ? A. 
I think he wrote a letter. 

Q. Did you have any conversation with Senator Armstrong 
after that ? A. I think I met the Senator, I know I met him, 
talking about some other matter, and I mentioned this to him. 

Q. Did he make any reply ? A. He said he had a letter from 
Mr. Dawson, and I asked him if it changed his opinion, and 
he smiled and said no, or something to that effect. 

Q. Mr. Dawson had then ceased to be the actuary of the Com¬ 
mittee ? A. The Committee had ceased its labors for months. 

Q. And he was then representing one of the insurance com¬ 
panies ? A. Well, that communication came in that way. 

Q. It purported to represent this policy from the Postal Life ? 
A. It was their policy. 

Q. And you understood he was acting in their behalf ? A. He 
said nothing more than that. 

Q. Did you communicate after the adoption of the standard 
practices with Governor Hughes ? A. Of the standard policies ? 

Q. Yes. A. I sent him copies just as I did Senator Armstrong, 
Mr. Kogers, Mr. Dawson and several others. 

Q. I show you a letter. State what it is ? A. This was the letter 
I sent to him, a copy of it. It reads as follows: “ October 2d, 
1906, Mr. Charles E. Hughes, 96 Broadway, Hew York. Dear 
Sir: Enclosed herewith you will please find a set of four Hew 
York Standard Life Insurance Policies, six supplementary con¬ 
tracts and memorandum relating thereto. Respectfully yours. 
Otto Kelsey, Superintendent.” 

Mr. Hatch.— I offer that letter in evidence. 

(Marked Exhibit 38.) 

The Chairman.— These exhibits that have been offered, I as¬ 
sume you will have them in some place where they may be read 
by the Committee, the same as other public documents ? 

The Witness.— They are public documents in the Department. 

Mr. Hatch.— They will be arranged in proper order and for the 
use of the Committee or the Senate at any time. 

n 




162 


Senate Judiciary Committee. 


Senator Armstrong.— Some of the members of the press have 
inquired whether these documents wdiicli were marked in evidence 
but not spread upon the record would be equally accessible in some 
convenient form. 

Mr. Hatch.— Certainly. 

Mr. Ainsworth.— Certainly. 

Mr. Hatch.—And we shall he very glad to have the press pub¬ 
lish the whole of them, together with this oral testimony. 

Q. What reply did you receive from Governor Hughes to that 
letter ? A. I do not recollect any; the letter was the mere trans¬ 
mission of the forms. 

Q. And you received no letter from him acknowledging their 
receipt ? A. I think not. 

Q. Did you ever receive any objections from him as to them ? 
A. I did not. 

Q. And so far as you know, there was no objection upon his 
part ? A. I never heard of any. 

Q. I show you another letter. (Handing paper to witness.) 
Who is that from? A. From myself and addressed to Hon. 
William W. Armstrong, Rochester, New York, under date of 
October 2d, 1906. 

Mr. Hatch.— I offer that in evidence. 

(Admitted and marked Exhibit No. 39.) 

Q. Will you read it? A. (Reading) “ October 2d, 1906. 
Hon. William AY. Armstrong, Rochester, New York. Dear Sir: 
Enclosed herewith you will please find one set of four New York 
Standard Life Insurance Policies, six Supplementary Contracts, 
and memorandum relating thereto. Respectfully yours, Superin¬ 
tendent.” 

Q. Did you receive any acknowledgment of that ? A. I think 
not. 

Q. Did you afterwards — did you at any time see Senator Arm¬ 
strong with respect to that matter? A. Not specially for that; 
but I met him a great many times. 

Q. Did you have any conversation with him with respect to his 
having received the policies? A. He stated he had them. He 
called my attention to, I think, a single place, and I am not sure 
but it is the same that Mr. Dawson had reference to, where the 
Committee had intended that a change in beneficiaries should take 
effect upon the filing of the change with the company; that is the 
only suggestion I remember. 





Testimony of Mr. Kelsey. 


163 


Q. Have you ever from any source ever received any criti¬ 
cism of the standard policies, beyond that you have stated ? A. I 
have not. 

Q. Or but that it met the approval of what the Committee in¬ 
tended to accomplish by the passage of thq law ? A. I have had 
no criticism relating to the form of the contracts as carrying out 
the intent of the statute. I have had a great deal from the com¬ 
panies and others as to the policy of the State in fixing the stand¬ 
ard form, and things of that sort. 

Q. They pitched into the Committee and the State, and not 
into you ? A. That is so; the Legislature, and not me — once. 

Q. During this period, Mr. Kelsey, were you required to make 
any rulings upon the construction of the Insurance Law ? A. 
Constantly. 

•Q. How would that arise? A. From correspondence, and per¬ 
sonal interviews. 

Q. From whom? A. From companies, life insurance com¬ 
panies, from counsel, from actuaries and from other State de¬ 
partments. 

Q. Under what provision of the law mainly were these rulings 
made ? A. The standard form was Section 101; and then there 
was a limitation of expenses which caused a great deal of trouble. 

Q. I will take those one at a time ? A. Well — 

Mr. Hatch.— How, I desire to offer these rulings in evidence, 
and then Mr. Mayer will, for the information of the Committee, 
read a brief statement as to what the rulings cover. 

Q. First, please examine those papers which I show you (hand¬ 
ing papers to witness). What are they? A. They are letters of 
inquiry to which is attached the response from the Superintendent 
of Insurance, myself; and there is also a little memorandum of 
what the substance is. 

Q. They are rulings as to what? A. Section 101, Standard 
F orms. 

Q. And all the papers included in the bundle which you now 
have are limited to the construction of that section? A. They 
are. 

Q. Who made those rulings ? A. I did. 

Q. And they were the product of your personal judgment? 
A. They were. 

Q. In each instance ? A. Every time. 

Mr. Hatch.— I desire to offer them in evidence. 





164 


Senate Judiciary Committee* 


Mr. Ainsworth.— You do not care to have all of them printed, 
do you ? 

Mr. Hatch.— No. 

(Admitted and marked Exhibit 40.) 

Mr. Mayer.—■ We have abstracted the rulings in regard to this 
one section for the convenience of the committee, in order not 
unnecessarily to delay matters, and I will read these rulings. 

Mr. Ainsworth.— Suppose you take one of the letters and read 
the letter and the rulings, as a precedent. 

Mr. Mayer.— Very well. (Reading) “ Relating to the issuance 
in 1907 of policies on standard forms which have been applied 
for hut not paid for in 1906.” The letter is from the Metropol¬ 
itan Life Insurance Company, and is dated New York, November 
14th, 1906, and addressed to Hon. Otto Kelsey, Superintendent 
of Insurance, Albany, New York. 

“ Dear Sir: * 

“ In view of the ruling given under date of October 22d requir¬ 
ing all life insurance companies this year to make returns to the 
department on the basis of paid for business only, we beg to ask 
whether policies issued in 1906 on which the first premium is 
paid in 1907 are to be considered as having been issued in 1907 
as would ordinarily be the case with policies reported in this man¬ 
ner, and if so, would it be necessary to recall all such policies and 
reissue them on Standard forms. 

u At the end of December, we are bound to have some applica¬ 
tions received during the month of December on which we have 
been unable to issue the policies. Then, too, there will be a large 
number of applications written in December which will not be 
received in this office until January, on account of medical ex¬ 
aminations, delays in the mail, etc. Must we treat these as of the 
issue of 1907 and issue the policies on the standard forms? If 
so, what commissions are we to pay,— those the agents were en¬ 
titled to at time of writing application, or those at the time we 
issued the policy? 

“ In connection with this, Section 58 provides that, ‘All state¬ 
ments purporting to be made by the insured shall in the absence 
of fraud be deemed representations and not warranties.’ We pre¬ 
sume that applications containing warrants will be held to be rep¬ 
resentations and we need not worry about the fact that in the 
applications they are called warranties. In other words, we are 
not forbidden to call them warranties^ even if the law calls them 







» 


Testimony of Mr. Kersey. 165 

representations. This specifically refers to applications received 
at the end of this year. 

Yours truly, 

(Signed) J. M. CEAIG, 

Actuary.” 

To which letter the Superintendent of Insurance replied, under 
date of November 21st, 1906, as follows: 

“ Mr. J. M. Craig, Actuary, 

Metropolitan Life Insurance Company, 

New York City. 

“ Dear Sir: 

“ Your favor of the 14th inst. has been received. 

“ Tou ask: ‘ Whether policies issued in 1906 on which the first 
premium is paid in 1907 are to be considered as having been 
issued in 1907 as would ordinarily be the case with policies re¬ 
ported in this manner, and if so, would it be necessary to recall all 
such policies and reissue them on standard forms ? ’ To this my 
answer is, Yes. 

“ You state: ‘ There will be a large number of applications 
written in December which will not be received in this office until 
January on account of medical examinations, delays in the mail, 
etc. Must we treat these as of the issue of 1907 and issue the 
policies of the standard forms? ’ To this my answer is, Yes. 

u In all those cases where applications and medical examina¬ 
tions are made, and binding receipts given before December 31st 
next, the policies may be written on the 1906 forms. 

“ Section 97 of the Insurance Law prescribes rates for first year 
and renewal commissions on policies issued after 1906, which 
may not be exceeded. In this connection I would call your atten¬ 
tion to the fact that the Attorney-General has taken e the general 
position that the new provisions of the statute would not and 
could not affect contracts previously lawfully entered into and as 
to which there was no reserve power of alteration or revocation, 
at any rated 

“ I am of the opinion that the form of application used by any 
company should be worded in accordance with that provision of 
Section 58 which reads: ‘All statements purporting to be made 
by the insured shall in the absence of fraud be deemed representa- 
lions and not warranties.’ 

Respectfully yours, 

OTTO KELSEY, 

Superintendent’’ 


166 


Senate Judiciaky Committee. 


Yow the letters — these letters are from the officers of insurance 
companies not only within the State but from without the State, 
and inquiries from insurance agents and from individuals. The 
letter which I have just read is a typical letter of the mass of 
letters that came under this particular section. 

We would like to offer in evidence this abstract of decisions. 

(Admitted and marked Exhibit 41, and is as follows.) 

101—1. Ruling relating to the application for policy of life in¬ 
surance, or “ other writings.” 

101-1-A. Relating to certain provisions in Standard Policy 
forms. 

101—2. Ruling relating to extra premium and loans on account - 
of extra hazards or sul>Standard risks. 

101—2 A. Relating to first sentence of the Standard Policy 
form. 

101—3. Relates to difference between the rule for determining 
loan values and that for determining surrender values. 

101—4. Relates to the line numbers in Standard Policy forms. 

101—5. Relates to policy forms which may be issued by Yew 
York corporations for delivery in other states. 

101-6. Ruling in regard to translation of Standard Policy 
forms into French language. 

o o 

101—6-A. Relating to “ non-participating ” forms. 

101—6-13. Relating to coupon bond policy. 

101-7. Relates to options (a) and (b) on surrender lapse, in 
Yew York Standard Life Insurance Policies. 

101-7-A. Relating to certain indorsements for Standard Policy 
forms. 

101—7-B. Relating to a certain rider or riders for attachment to 
the Yew York Standard Life Policy forms. 

101—B. Relating to contracts with return premium or paid-up 
short term features. 

101-9. Relating to policy forms to be issued by Yew York cor¬ 
porations for delivery in other states. 

101—10. Relating to deferred dividend plans. 

101—11. Relating to table of loan and surrender values in 
Standard Life Insurance Policy. 

101—11-A. Relating to change in premium clause of the Yew 
York Standard Life Insurance Policy. 

€V 

101-12. Relating to table of loan and surrender values’ in 
Standard Life Insurance Policy, 

t j * 



Testimony op Mr. Kelsey. 


167 


101-13. Relating to title page of leaflet descriptive of New 
York Standard Life Insurance Policies. 

101—14. Relating to sub-heading in table of loan and surrender 
values. 

101—15. Relating to table of loan and surrender values. 

101—16. Relatin g to table of loan and surrender values. 

101—17. Relating to application for life insurance policy. 

101—18. Relating to the issuance in 1907 in policies on stand¬ 
ard forms which have been applied for, but not paid for in 1906. 

101—19. Relating to engraved heading, back, and receipt for 
life insurance policies. 

101—19-A. Relating to annuity forms. 

101—80. Relating to the business (issues to which standard 
forms of policies will apply). 

101—21. Relating to indorsements on the backs of standard 
policy forms; also supplementary contracts. 

101—22. Relating to cash surrender values. 

101-23. Relating to days of grace for payment of fractional 
premium during the first year. 

x Co t/ 

101—24. Relating to “ special condition ” and indorsement 
policies on lives of young people. 

101—25. Relating to change from tropical to ordinary rate un¬ 
der certain conditions. 

101—26. Relating to forms of application for life insurance. 

101-27. Relating to line numbers on standard policy forms. 

101—28. Relating to cash surrender value. 

101—29. Relating to “ military and naval clause,” and to “ spe¬ 
cial condition ” for those who have beep engaged in the liquor 
business. 

101—30. Relating to form of application for life insurance not 
acted upon. 

101-31. Section does not apply to life insurance companies of 
either states. 

101—32. Relating to exchange of policies. 

101-33. Relating to form of policy to be issued when applica¬ 
tion was made and premium paid prior to December 31, 1906. 

101—34. Relating to the exchange of policies. 

101—35. Relating to policy form for short term insurance. 

101-36. Relating to endorsement on standard life insurance 
policy to cover extra hazards. 

101-37. Relating to special policy forms with “ deferred 
premium return;” not approved. 


108 


Senate Judiciary Committee. 


101-38. Relating to sending out new approved forms of 
policies as tliey are received from the printer. 

101-39. Relating to exchange of policies. 

101-40. Relating to options on surrender or lapse. 

101—41. Relating to certain policies which Home Rife Jnsm 
ance Company proposes to ; issue in other states. 

101-42. Relating to cash surrender values. 

101-43. Relating to the automatic surrender values of stand¬ 
ard policies. 

101—44. Relating to proposed change in standard form of life 
and endowment policies. 

101-45. Relating to policies of Connecticut Mutual Life In¬ 
surance Company. 

101-46. Relating to forms of policies that may be issued by 
Hew York life insurance corporations. 

101-47. Relating to the issues of the Travelers’ Insurance 
Company, Hartford, Conn. 

101-48. Relating to exchange of policies. 

101-49. Relating to preliminary term policies issued by a 
foreign corporation of another state. 

101-49-A. Relating to adding return premium features to poli¬ 
cies issued prior to 1907. 

101-50. Relating to line numbers of standard policy forms. 

101-51. Ruling relating to last paragraph of section 101. 

101-52. Relates to an exchange of policies. 

101-53. Relating to an exchange of policies. 

101-54. Relating to a policy form for endowment S. S. rated 
up age single premium! 

By Mr. Tlqtch: 

Q. Mr. Kelsey, during the period of time of which you have 
spoken did you have any occasion to consult with the Attorney- 
General? A. Frequently. 

Q. IT ow frequently? A. I lived in the same house with him. 
It was a daily matter, while he was here, and at frequent inter¬ 
vals, every day or two, there was occasion to go to his office 
with correspondence or to communicate officially, presenting a 
question. 

Q. And as these questions arose from time to time, of which 
you have spoken, did you have occasion to see him in consulta¬ 
tion ? A. I did. They were discussed frequently. 


Testimony of Mr. Kelsey. 


169 


Q. Will you state what general questions you now recall in 
which' you consulted him ? A. Well, it covers practically all of 
the hew sections of the Armstrong statute as they came up. We 
were under pressure from the lists, the standard forms,—• the elec¬ 
tion, particularly, as it progressed, the expense account, the limi¬ 
tation of business, the interpretation of all the sections in fact. 

Q. So with respect to these rulings, many of them of which 
you speak, did you not have occasion to consult him? A. Yes. 

Q. With respect to the ruling that you should make? A. Yes. 
There are rulings that are based upon official opinion, letters 
from him on questions submitted, and there are many that are 
the result of conference with him, where there is no record in 
the office of letters received or exchanged. 

Q. So if you had doubt in your mind with respect to any 
given question which was given to you for your determination, 
did you apply to the Attorney-General ? A. Always. 

Q. And advised with him before you answered? A. Yes. Of 
course, that was not every legal question — well, but you said 
about which I had any doubt; yes, that is right. 

Q. And those that were clear to your mind you answered with¬ 
out consultation ? A. Certainly. 

Q. And in those cases where there was any doubt in your 
mind, you went to the Attorney-General? A. Yes, those which 
were new. 

Q. And these rulings which you have made, both courses are 
represented therein ? A. Yes. 

Q. Yow, may I ask you, in these fifty-four rulings you made, 
if each one was under the so-called Armstrong Law? A. Yes. 

Q. So, those were all new questions? A. Yew questions, yes. 

Q. Lor which you had no precedent? A. Yo precedent. 

Q. If I understand you correctly, Mr. Kelsey, after you had 
either determined the matter yourself or after consultation with 
the Attorney-General you then made this determination your¬ 
self ? A. I did. 

Q. There was no intervention of any other person ? A. Yo. 

Q. Deputy or otherwise? A. Yo. 

(Recess taken until 2 p. m.) 



170 


Senate Judiciary Committee. 


After Recess 2 p. m. 

Otto Kelsey resumed tlie stand and further testified as follows. 

By Mr. Hatch: 

Q. Mr. Kelsey, I call your attention to the annual statements 
of the fraternal beneficiary associations. Were those associa¬ 
tions covered by the new law ? A. They were not. v 

Q. There was no legislation then in that year which affected 
them? A. Not bearing directly on the fraternals; that is, of any 
account. 

Q. Oh, I omitted to ask you one thing. Was Mr. Dawson 
employed by you? A. No. 

Q. At any time? A. No! 

Q. Whatever suggestions he made on behalf of the Committee, 
were made of his own motion ? A. Because of his having an in¬ 
terest. 

Q. And he never had any connection with the Department? 
A. Oh, no, not since I have been there. 

Q. With respect to the fraternal beneficiary associations, did 
you have any consultation with Governor Higgins ? A. I did. 

Q. When was that? A. I think it was in July. 

Q. And where ? A. At his office. 

Q. What was the occasion? A. I had become much dissatis¬ 
fied with the situation of the fraternals — that is, mostly the 
beneficiary associations ? 

Q. Yes. A. Their plan is the assessment. From correspond¬ 
ence which came in I v T 'as led to go over their former reports. 
There was a great deal of complaint of their failing to keep their 
contracts and of misleading and deceiving the poorer classes of 
people, who were insuring in them, and I thought it was a good 
thing to put in some comments in the annual report which was 
then about ready to be printed — in the volume that bore the 
fraternal tables, reviewing the work, calling attention to it. 

Q. That volume related in the main to the administration of 
your predecessor? A. Well, the tables were all compiled by the 
office during his term before I came in. While it was under 
my name it was the compilation of Senator Hendricks. I went 
up with a draft of a page or two of the text of the report, you 
would call it, that I had determined to print, and I asked the 
Governors judgment whether there was any objection in his mind 




Testimony of Mr. Kelsey. 


171 


to putting it in. lie took tlie typewritten sheets and read them 
over and said he could see no objection. 

Q. Mr. Kelsey, you spoke about this being called to your at¬ 
tention. When you first assumed the duties of the office, what 
did you do with respect to all the correspondence that came 
into the Department? A. Well, in my start there I told the 
deputy and assistant to bring the entire mail, the correspondence, 
to my desk so that I could read the letters and become familiar 
with the run of daily work, no matter how insignificant — all 
the receipts and routine matters, as well as all the important ones 
of administration, so that for a few weeks everything in the way 
of mail came to my desk. 

Q. That is, it came to your desk until you had familiarized 

Yourself with the details of the office ? A. Yes. 

</ 

Q. And in the course of your examination of this correspond¬ 
ence was the discovery made by you with respect to these frater- 
nals? A. It was. 

Q. And that was the occasion of your taking this up? A. 
Yes. 

Q. And the law provided with respect to the reports of these 
fraternal societies,— do you recall the provision? A. Well, they 
filed their annual reports with a statement, the same as ordinary 
life insurance companies. 

Q. That was required to be made when? A. The 31st of 
December. 

Q. And when are those published? A. Well, they are re¬ 
quired to be filed by the first of March. Then they are pub¬ 
lished — that is, they have to be audited by the statistician. 
There is usually a great deal of correspondence in getting it 
settled, and after that abstracts are made up from the reports. 
The fraternal assessment is a small volume — Ko. 4 it was last 
year of the report. 

Q. When does that come out? A. It is printed along in the 
summer, the practice has been; sometimes as late as August. 

Q. That had been the custom of getting out those reports by 
all of your predecessors? ‘A. That has been the custom since I 
have been here. 

Q. So it is- A. When I say since I have been here, I 

mean in Albany — in the Legislature. 

Q. It is required to go out at what time? A. They are filed 
December 31st-; that is, the business as of December 31st. They 








172 


Senate Judiciary Committee. 


are required to be filed in our Department before the 1st day of 
March. 

Q. And then the publication of those reports by the Superin¬ 
tendent has usually not resulted in being ready for delivery until 
some time during the following summer ? A. Yes. 

Q. About August? A. July and August, I think. 

Q. The occasion of your seeing Governor Higgins at that time 
related to the fact that this would be a part of your report and 
part of your predecessor’s report ? A. Yes, it would. 

Q. The question in your mind was whether you should put 
that into the volume ? A. Yes. 

Q. In connection with your predecessor’s report ? A. Yes. 

Q. And that was what you consulted him with respect to? 
A. I did. 

Q. Was there anything else that you consulted with him about 
at that time ? A. That led to a talk about the Insurance Depart¬ 
ment situation. 

Q. Yes, I will come to that later. What did you do in con¬ 
nection with providing a form of report for these fraternal bene¬ 
ficiary associations ? A. In connection with the preparation of 
the blanks for the old line companies, we prepared a new blank 
for the fraternals. 

Q. How, what was that blank? A. It is a tabulated form, 
large sheets, ruled columns — inquiries that are required to be 
answered. 

Q. How, will you state to the Committee so that they may get 
an idea of what the difficulties and abuses were that vou found 

t/ 

existing with respect to those fraternal beneficiary associations 
which induced you to prepare this blank? A. The reports as 
we had them were not full enough. We could not get at the 
actual condition of the companies. The complaints that are con¬ 
stantly being made — they have not ceased yet, although they 
have been modified — are that they had insured under certain 
promises as to what the returns would be, either in paid-up in¬ 
surance or the amount of money to be received, or the assess¬ 
ments—■ whether they would be increased or not, and the contents 
of the contract as to forfeiture when the policies would lapse; 
the general tone of them being that they had been deceived and 
had been robbed, and that they felt it was the duty of the Depart¬ 
ment to correct it and to make it right. 






Testimony oe Mr. Keesey. 


173 


Q. Was there any deficiency with respect to the rates as be¬ 
tween old insurers and new? A. Well, that applies to both fin¬ 
ternals and business associations — business assessment. The 
rates are inadequate in a great many cases — practically all of 
them. 

Q. How is it affected as to age? A. Well, the younger men 
have to pay too much for the actual insurance they get, and the 
older ones too little. Eventually, as the years go by, experience 
shows that these associations go to the wall or else raise the rates. 

Q. And the income in that regard is not equal to the disburse¬ 
ments ? A. Ho. 

Q. As it runs along ? A. It is not. They gradually go down. 

Q. Do you recall when this was first discussed, I mean, after 
you had consulted with Governor Higgins? A. Well, it had been 
talked in the Department with my associates prior to that. It 
was a matter of almost daily occurrence in the correspondence — 
these complaints. 

Q. Do you recall whether or not that was a subject of discus¬ 
sion at a meeting of Superintendents ? A. Yes, it had been. 

Q. When was that ? A. I don’t remember the day when they 
were there. 

Q. Do you recall whether it was in June or not? A. \ think 
it was. 

Q. And what body discussed it at that time ? A. It was first, 
my recollection would be, that the blanks were taken up by the 
Committee on Blanks of the National Convention and discussed. 
Mr. Appleton, who represented this State on the National Com¬ 
mittee, the Deputy of the Department, was Chairman of that 
Committee and had been for three or four years. He. went to 
New York and was there during a week or so in consultation. He 
brought back the work that had been produced as the result of 
these consultations, and that was gone over by us. Subsequently 
the committee or some of them were here. 

Q. To whom was this submitted when he came back? A. To 

me. . , 

Q. Then you made an examination of it? A. 1 did. 

Q. Now, that meeting was where, you say? A. New York 
+he first one. 

Q. And the second one? A. Well, the second that I knov 

about was here. 





174 


Senate Judiciatjy Committee. 

Q. Well, the second one that Mr. Appleton attended ? A. 
Here at Albany, I think. 

Q. Who was present at that meeting ? A. There was Mr. 
Fletcher, of Massachusetts; Mr. Hadley, I think, of Michigan, 
and Mr. Stillwell, of Ohio, I think; and there were some others 
whose names I do not recall. 

Q. Did they come to Albany from the convention? A. Ho, 
that was before the convention. The convention was in October. 
That was preparatory to the convention. 

Q. Exactly. But it was after this Hew York meeting in June ? 
A. Yes. 

Q. How, what was the subject under discussion at the time 
that they were here ? A. The preparation of the blanks. 

Q. That is, relating to what? A. To the schedules, what 
should go into them, what they should show. 

Q. How, you spoke of Mr. Eletclier, of Massachusetts ? A. 
Yes. ' 

Q. And who else ? A. Mr. Hadley, of Michigan, and Mr. 
Stillwell, of Ohio, I think, of the departments. 

Q. What departments? A. The Insurance Departments. Mr. 
Fletcher is the examiner, I think, of Massachusetts, and Mr. 
Stillwell is the actuary of the Ohio Department, and Mr. Hadley, 
I don’t know his position. 

Q. Then this matter of the blanks was under discussion, was 
it, at that time ? A. Yes. 

Q. And was that the purpose of their visit? A. Yes. 

Q. Did you take part in that discussion ? A. I did. 

Q. And then what was done? Did you prepare a blank? A. 

I did, that is, with the assistants; they were working it out. Mr. 

Fletcher stayed there two or three days after the others went and 

worked at our Department. Mr. Appleton and* myself, the 

Actuary, Mr. Paterson, and Mr. Fletcher. 

Q. And the subject of that examination was this blank? A. 

Well, the blanks were together, this and the others. 

Q. I mean this was included in vour examination ? A. This 

«/ 

was included, yes. 

Q. This was for the purpose of developing a new blank? A. 
Yes. 

Q. To meet with the things which you had found ? A. Yes, 
and which the others found, so as to have a uniform blank which 
could be approved by the convention. 


Testimony of Me. Kelsey. 


175 


Q. So tliat there would be uniformity as to all the States? 
A. Yes, so as to have it as nearly uniform as could he. 

Q. Did you determine at that time substantially upon a blank? 
A. We did, practically — the form. 

Q. Where was that sent? A. It was finally taken to Wash¬ 
ington to the convention. 

Q. Dy whom ? A. Mr. Appleton, I think. The other mem¬ 
bers may have had copies too. Mr. Appleton took it from here. 

Q. Did you attend that meeting? A. I did not. 

Q. Why did you not attend? A. There was such a pressure 
of business here that'I did not feel at liberty to he absent. 

Q. Matters were coming up that required your constant atten¬ 
tion ? A. Yes, constantly; all these matters we were talking 
about heretofore and others. 

Q. What became of this proposed form after the Washington 
meeting? A. It was brought back, and when whatever sugges¬ 
tions and changes that had been made there were incorporated, 
the Department here, under my direction, printed the complete 
revised forms, after the adoption by me for this State, and we 
distributed the blanks to the other departments — the other state 
departments — members of the convention, that is, that were. 

Q.- Now, had there ever been any such thing as this blank 
which you developed at that time in insurance circles thereto¬ 
fore ? A. Not in this form. 

Q. Have yon here the copy of the report that you —— 

Mr. Hatch.— I desire to offer in evidence the addition made 
by Mr. Kelsey to the report of his predecessor. 

The Witness.— That is No. 4. 

Mr. Mayer.— The addition referred to in Part IV of the New 
York Insurance Department Report for 1906, beginning at 
page 27. 

Mr. Ainsworth.—• That is the business of 1905. 

Mr. Hatch.—H might state that I offer it for the purpose of 
showing that the Superintendent possesses some initiative 
faculty. 

(Admitted and marked Exhibit No. 42.) 

Mr. Mayer.— I will now read Exhibit 42 to the Committee. 
It is headed Fraternal Endowment Orders, and begins at page 
twenty-seven, Roman numerals in Part IY of the Annual Report 
of the New York State Insurance Department for year 1906. 

(Reading) : 












176 


Senate Judiciary Committee. 


“ Included in the fraternal portion of this report are abstracts 
of the annual statements of three orders which, by direct provi¬ 
sions in their articles of incorporation under Article VII of the 
Insurance Law, have acquired the right to pay benefits to living 
members at the expiration of a five-year continuous period of 
membership. 

This right to pay what is generally understood to be endow¬ 
ment benefits was incorporated in the I raternal Law at the time 
of the codification of the Insurance Laws in 1892. It appears 
from the records and from various annual reports made to the 
Legislature since that time, that the Department was opposed 
to this provision of the law, and the amendment of 1903, chapter 
450, eliminating from Article VII the right to incorporate 
further orders of this character, was passed upon its recommenda¬ 
tion. 

The Department is daily in receipt of communications from 
citizens of this and other States regarding these orders, the safety 
of their plans, and the probability of their fulfilling their con¬ 
tracts as understood by the general public; the writers assuming 
that such orders are under a supervision which enables the De¬ 
partment to pass upon their solvency. The Department is com¬ 
pelled to state that orders operating under the provisions of 
Article VII of the Insurance Law, have with it no deposits; that 
they are not required to hold reserves for the protection of their 
certificate holders; that they have no standard of solvency; that 
contracts issued bv them do not guarantee the payment of a stated 
sum at the end of a five-year period, or any definite period of 
membership; that their contracts usually contain a provision 
that the benefit to be paid at the expiration of a fixed period of 
membership shall be “ an amount not to exceed ” the sum stated; 
that the payment of any amount which may be in hand at the 
end of the stated period would be a fulfillment of their contracts; 
that the attempt to pay such benefits by fraternal orders is, in the 
judgment of the^ Department, unwise, and that any institution 
endeavoring to write such contracts is more than apt to meet with 
financial disaster. An examination of the rates collected will 
show that they are inadequate to produce the amounts which the 
orders are supposed to promise to pay. 

It cannot be denied that these orders, as shown by their annual 
statements carried in this report, have had during the past year 
a phenomenal growth. It is also apparent that accompanying this 


Testimony of Me. Keesey. 


177 


growth there has been an expense of management which is in 
excess of the ordinary expense incident to the conducting of the 
business of fraternal insurance. While these orders, during the 
year, have increased their assets, their membership, and the 
amount of insurance in force, a careful review of their state¬ 
ments does not indicate a healthy or conservative growth, or a 
financial condition which would warrant any other statement than 
that set forth above, namely, that it is the opinion of the Depart¬ 
ment that they are ‘ more than apt to meet with financial dis¬ 
aster.’ 

11 In Part II of the Department Report for this year, dated 
July 23; 1906, reference was made to the fact that the annual 
statements of assessment and fraternal associations would he pub¬ 
lished in a separate volume. This, the volume referred to, com¬ 
pletes the report of 1906. 

Respectfully submitted, 

OTTO KELSEY, 

Superintendent 

Q. What paper is that, Mr. Kelsey (handing paper to witness) ? 

A. This is the old form of the annual statement required from 
the fraternals. This is for the year 1905. 

Mr. Hatch.— I desire to offer that in evidence. 

(Admitted and marked Exhibit 43.) 

Q. What is this paper, Mr. Kelsey (handing paper to wit¬ 
ness) ? A. This is a proposed form of the new blank as it was 
taken to Washington, for the year 1906. 

Mr. Hatch.— I desire to offer that in evidence. 

Mr. Ainsworth.— That is the first print of the new blank ? 

The Witness.— Yes. 

Q. Changes were made in that? A. The changes were made 
as suggested at Washington and incorporated in the final reprint. 

(Admitted and marked Exhibit Ho. 44.) 

Mr. Mayer.— The first blank, or the old blank, Exhibit Ho. 43, 
which will be handed to the Committee, shows seven pages, each 
containing various inquiries, supposed to develop the true condi¬ 
tion of those companies. The blanks sent to Washington from . 
the Department, as testified by Mr. Kelsey, being Exhibit Ho. 44, 
shows thirteen pages, and when the Committee examines these 
blanks it will find various schedules calculated to develop in¬ 
formation very much more elaborately and better separated, and 
12 





178 


Senate Judiciary Committee. 


asking additional questions and containing additional inquiries 
intended to show the true condition of the companies. 

Q. What is that paper, Mr. Ivelsey (handing paper to wit¬ 
ness) ? A. This is the final form of the annual financial state¬ 
ments for the year 1906. 

Q. Now, will you state to the Committee in what-respect, this 
blank as finally developed differs from the other in the general 
aspects, with respect to the information sought to he required 
and required of these fraternals? A. Well, there are fifteen 
pages. The interrogatories have been largely increased. Where 
there were two or three topics or headings on a page, there is a 
single one, and where there were very few questions, they have 
been increased ranging up to fifty under a head. It would be 
better for the Committee to take this and compare it directly with 
the other. 

Q. I understand. But what I want is the subject which 
tended to develop the condition of the companies ? A. Well, the 
scope has been enlarged in all of them — the disbursements, the 
ledger assets, the liabilities, the details of assessments made dur¬ 
ing the year. On page 6 is Schedule 7, which might be called a 
bird’s-eye view of the condition of the company. It is arranged 
in columns, with the ages running from 18 to 85, the number 
of members at each age, the amount of insurance, the amount re¬ 
ceived, the mortuary estimates, and the number of death losses. 
You are enabled by looking at the page to at once determine the 
surplus or excess charge for the earlier years and the deficiency 
for the later years, showing the inadequacy of the rates to carry 
the claims to maturity. 

tJ 

Q. I call your attention there to the miscellaneous questions. 

Will you state the difference in the number between the old and 

/ 

the new form under the subject covered? A. No, I do not have 
it here—•general interrogatories I assume is what you refer to, 
instead of miscellaneous. 

Q. Yes. “ Miscellaneous ” was my language ? A. Yes. Well, 
there is a page and a half nearly here. 

Q. And there were how many in the old blank? A. I don’t 
remember. I would have to look to see. It is limited. (Wit¬ 
ness here examined old form.) There are fourteen questions 
here. 

Q. And how many are there in the new form ? A* Thirty* 
seven. 


Testimony of Me. Kelsey. 


179 


Q. Now, have you in there such a schedule as No. 7 ? A. It 
is here m the final form, and it was also in the blank that went to 
Washington. 

Q. A as that required in the old blank? A. It was not. 

Q. Yhat purpose does that serve? A. It serves to show the 
condition of the company in relation to assessments collected and 
disbursements paid for death losses at the various ages. f 

Q. And.that exhibits the excess paid by the younger members 
efic encj in the assessments of the older members ? 
A. les, and unless they have a big increase all the time of new 
blood coming* in they are in danger. 

Q. IIow is it with respect to Schedule A? A. That is the 
exhibit of funds. 

Q. Hid that find any place in the old form ? A. I think not. 
If it is, it is very brief. All of those are elaborate, and I think 
most of them are new. 

Q. How about Schedule 15 ? A. That is a special deposit. 

Q. Is that new* ? A. I do not recall whether that is entirely 
new or not. 

Q. A comparison will show ? A. Comparison will show. At 
the time, I knew about it, when we were putting it out. I haven’t 
looked it over for months. 

Q. You do not recollect now? A. No, sir. 

Q. Now t the Exhibits or Schedules 9, 10, 11, 12 and 13, they 
are an elaboration- A. You mean the pages? 

Q. No, the Schedules 9, 10, 11, 12 and 13- A. They 

call them exhibits here. 

Q. Well, exhibits. They are in addition to what was de¬ 
manded in the old schedule ? A. They are. 

Q. Now, in your examination and the information that you 
received and the complaints in respect to these fraternals, did 
you regard each one of those subjects upon which you required 
information as therein specified necessary and essential to a 
proper supervision of those societies ? A. I did. Judge, you used 
the word “ fraternals.” The ones that the most criticism arose 
against was what they call business assessment corporations. The 
fraternals, properly speaking, as a whole, are doing magnificent 
work. 

Q. Well, co-operative business assessment? A. Yes, and fra¬ 
ternal endowments. 




180 


Senate Judiciary Committee. 


Q. Those are the ones you have referred to during your testi¬ 
mony ? A. The business assessment — that is the one about 
which the correspondence at times floods the office. 

Mr. Hatch.—-1 desire to offer in evidence this form of report. 

(Admitted and marked Exhibit 45.) 

Mr. Mayer.— Exhibit 45 is the form finally adopted by the 
Superintendent of Insurance, as testified. 

Q. What disposition, Mr. Kelsey, did the Armstrong Law 
make of these associations to which your attention has been di¬ 
rected ? A. It prohibited their further incorporation. 

Q. But it did not assume to affect the status of those already 
in existence? A. Ho. 

Q. What particular specific provision of the law could you 
refer to which gave you the power to exercise supervision over 
those societies ? A. It is the general power vested in my Depart¬ 
ment under the Insurance law. 

Q. Well, you mean there are no specific provisions? A. Hone 
that referred directly to them by name. 

Q. So that in developing this blank and concerning this sub¬ 
ject you exercised your general powers as Superintendent of 
Insurance ? A. Yes, for the supervision and regulation of the 
corporations under our control. 

Q. And you had no other authority? A. Ho. 

v *J 

Q. I call your attention to a pamphlet (handing paper to wit¬ 
ness). What is it? A. That is a preliminary report for the 
present year, 1907, of the Superintendent of Insurance. 

Q. Does that refer to this subject? A. It does, yes, sir. 

Q. Does it make any recommendation for legislation concern¬ 
ing it ? A. It does. 

Mr. Hatch.— I desire to offer that in evidence. 

The Wi tness.— You mean the whole report ? 

Mr. Hatch.— Yes, I will offer the whole report, because 1 
desire to refer to other parts of it. 

Q. What page is that on? A. Fraternal orders, Article VII, 
on page 83. 

(Admitted and marked Exhibit Ho. 46.) 

Mr. Mayer. Exhibit 46 is preliminary text of the forty-eighth 
annual report of the Superintendent of Insurance, submitted 1o 
the Legislature in February, 1907. 





Superintendent’s Preliminary Report. 


181 


ANNUAL REPORT OF THE SUPERINTENDENT OF 

INSURANCE. 

State of New York, Insurance Department, 

Albany, February 4, 1907. 

To the Legislature of the State of New York: 

I submit herewith the preliminary text of the forty-eighth an¬ 
nual report of the Superintendent of Insurance for the calendar 
year ending December 31, 1906. 

Annual statements from insurance corporations to this Depart¬ 
ment are required by law to date at the close of business De¬ 
cember 31 of each calendar year, and time is allowed until Febru¬ 
ary 1 for fire and marine and until March 1 following for all 
other classes of insurance corporations, for filing their tabulated 
statements. This practice has been established in conformity 
with uniform statutes of all other States of the National Govern¬ 
ment regulating annual statements and reports from insurance 
corporations, to the obvious advantage and convenience of the 
companies, the departments and the public. 

The calendar year so fixed as the business year for insurance 
companies prevents completing the report of the Superintendent 
of Insurance to the Legislature until so late in the session that it 
is impossible to have the statistics printed or collated for com¬ 
ment or action thereon until the following year. The fiscal year 
of New York terminates September 30. If it were practicable 
to have the annual reports and statements from the companies 
filed with the Department at the close of each fiscal year, a full 
review of recent transactions might be presented early in the suc¬ 
ceeding session of the Legislature with ample time for considera¬ 
tion of questions involved. It is not feasible, however, to bring 
about so desirable a change in the interest of this State alone 
against the satisfactory results derived from a course long followed 
and to which all other interests have been adjusted. 

The printing of the report of the Superintendent of Insurance 
is usually delayed until well along in the summer. In view of 
the legislation of the session of 1906, affecting life insurance com¬ 
panies, and the centering of public attention upon all phases of 
insurance during the past year, it is believed advisable to submit 
the text of the annual report from this Department so far as the 
same can be prepared in advance of the statistics to be filed on 


182 


Senate Judiciary Committee. 


or prior to March 1st, and later to include the detailed statements 
and additional matter for publication in the usual form. 

Report Published in Four Parts. 

The annual report for the year 1907 will be subdivided and 
printed in four parts, with a slight change in the arrangement 
as follows: 

Part I. Fire and Marine Insurance Companies. 

II. Life, Casualty, Title, Credit and Mortgage Guarantee 
Companies. 

III. Assessment and Fraternal Companies. 

IV. Reports of Official Examinations. Opinions of At¬ 

torney-General. Insurance Decisions by Court of 
Appeals. Insurance Laws of the Year. 

Financial Statement, of the Department. 

For the fiscal year ending September 30, 1900, the total of 
receipts and disbursements by the Department were as follows : 


Receipts. $322,940 00 

Disbursements. 149,253 60 

Surplus paid to the State treasury. $173,686 3f 


A detailed statement shows Receipts under the provisions of sec¬ 
tion 33 of the Insurance Law from corporations of other States 


to be as follows: 

Tax on premiums of fire insurance 

companies. $3 2,1 OS 17 

Tax on premiums of life insurance 

companies. 38,959 42 

Tax on premiums of casualty insur¬ 
ance companies. 16,078 87 

Charges for valuation of life policies. 14,339 62 

Certificates of authority. 30,097 50 

Filing statements. 2,820 00 

Filing charters. 220 00 

License to companies. N 594 07 

Registration, occupation and fran¬ 
chise fees . 120 00 


$135,337 65 


















Superintendent’s Preliminary Report. 


183 


Under provisions of section 34 of the 
Insurance Law: 

Tax on premiums of marine com¬ 
panies of other States. $36,833 78 

Tax on premiums of marine com¬ 
panies of foreign countries. 62,491 65 

Tax on premiums of casualty com¬ 
panies of foreign countries. 23,524 05 

Tax on premiums of life companies 

of foreign countries. 1,903 14 


Under all other sections of the Insur¬ 
ance Law: 

Certificates of authority to foreign 


companies. $6,408 00 

Filing statements of foreign com¬ 
panies . 1,540 00 

Summonses and complaints. 712 50 

Corporation certificates. 285 00 

Certified copies . 4,588 20 

Certificates of deposit and powers of 

attorney. 6,128 00 

Licenses to special agents. 3,600 00 

Postage. 2 40 


Refunded for examinations of insurance com¬ 
panies . 


$124,756 62 


23,264 10 
39,581 63 


Total Receipts. $322,940 00 

A detailed statement of Disbursements shows: 

For salaries and expenses of Super¬ 


intendent and deputies, and sal¬ 
aries of examiners, actuaries, 

clerks, and stenographers. $111,731 71 

Temporary services of counsel and 
appraisers and traveling and other 
expenses of employees on Depart¬ 
ment business. 19,231 20 

Printing and binding annual reports 
and special reports of examina¬ 
tions of Equifable Life Assurance 
Society. 4,015 00 






















184 


Senate Judiciary Committee. 


Expenses at Albany office. $9,646 30 

Expenses at New York office. 969 46 

Valuation of policies. 1,959 99 

Rent of New York city office. 1,700 00 


Total Disbursements. $149,253 66 

Surplus paid to State treasury. 173,686 34 


Total Disbursements 


$322,940 00 


A more extended itemized statement will appear with the full 
report. 

For the fiscal year there appears an excess of receipts over 
expenditures amounting to $173,686.34, being the largest surplus 
for a single year in the history of the Department. The aggregate 
of moneys paid to the State treasury, above the requirements of 
the Department, from collections made since its establishment is 
$2,147,577.15, more than one-half of which sum has been derived 
from the business of the last ten vears. The exhibit follows for 

t/ 

the fiscal year ending September 30, with the surplus balance 
stated for each of the ten years: 

tJ 


1896 . $59,439 56 

1897 .7. 75,477 07 

1898 . 86,502 91 

1899 . 92,235 72 

1900 . 114,191 87 

1901 . 120,544 34 

1902 . 107,045 51 

1903 . 89,789 74 

1904 . 141,950 14 

1905 . 136,175 26 

1900 . 173,686 34 


$1,197,038 46 


An examination of tlie foregoing statement of receipts will 
disclose the fact that except for refunds for official examinations 
of companies, substantially all moneys collected by the Depart¬ 
ment are from insurance companies of other States and of foreign 
countries. These payments are enforced under section 34, direct 



























Superintendent’s Preliminary Report. 


185 


and what is known as the reciprocal statute, section 33, like fees 
and penalties being imposed upon companies admitted to this 
State as are exacted from New York insurance companies doing 
business in other jurisdictions. 

It may be appropriate to consider whether in the present con¬ 
dition of both fire and life insurance within the State and the 
large revenues obtained beyond the needs of Department pur¬ 
poses, it would not be for the public interest to relieve admitted 
companies from the burden of special compulsory contributions 
of this character. A system of retaliatory taxation upon business 
transactions to ensure comity between governmental agencies with¬ 
out regard to the wants of the people directly interested, does not 
seem a good policy. If not discarded the imposition or with¬ 
holding of penalties might be directed toward ameliorating con¬ 
ditions for New York companies in other States or foreign coun¬ 
tries, and thereby exert a salutary influence for the general aboli¬ 
tion of such restrictions upon the business of insurance. 

Above the surpervision of collections of fees and conditional 
.penalties is the broad question of a reform in the method of 
supporting the Insurance Department by making direct appropria¬ 
tions from the revenues of the State instead of the present system, 
under which, if the expenses of the Department shall exceed the 
amount of fees collected pursuant to law, the excess shall be an¬ 
nually assessed by the Superintendent pro rata upon all the in¬ 
surance corporations of the State doing business therein, and the 
Superintendent is required to collect such assessments and pay 
them into the State treasury. While the successive annual sur¬ 
pluses from fees has avoided the levying of assessments upon this 
' class of corporations, a wwong principle remains in the statute. 
Experience in the administration of departments of government 
supported by forms of special taxation upon corporate interests 
supervised and regulated by such department, will sustain the 
recommendation of the Governor’s message for a change in the 
law as applied to another division of State government. The 
criticism is equally forcible with reference to the Insurance 
Department. 

If not prepared to radically revise the law providing for the 
support of the Department by apportioning the necessary sum 
among insurance companies pro rata, there is sufficient ground 
in the foregoing financial statement for exempting New York 
State compares from being hereafter charged wfith expenses of 


186 Senate Judiciary Committee. 

examinations. An official investigation is for the benefit of the 
public and the expense should rightfully be borne by the State, 
as is done in other departmental inquisitions, particularly in 
cases where no culpability exists. The insurance corporations 
hear their share of taxation and in recent years the burden has 
notably increased for State purposes. ISTo necessity demands a 
repayment of the expenses of examination from a company and 
relief therefrom will he an act of tardy justice. 

Attention is called to the fact that the appropriation made 
for the Department examining force, appraisers and counsel, re¬ 
quired to pass upon sufficiency of mortgage papers, etc., in con¬ 
nection with examinations, is a refund account. In line with 
the above suggestions such appropriation should he a direct one. 

Life Insurance Companies. 

The operation of the Insurance Law under amendments of 
* 1906, affecting the business of life insurance, has not been applied 
in many important provisions to an extent enabling the Depart¬ 
ment to determine results therefrom. Most of the amendments 
did not take effect until January 1, 1907, and many then in force 
will not be of apparent significance until a greater lapse of time 
than since their enactment. Whatever uncertainties prevail as to 
the complications in executing the law, its dominating principle 
of enforced publicity of details of business affairs in life insur¬ 
ance corporations will promote and ensure safe methods and good 
conduct by their responsible officers. 

Life Statement Blanks. 

Some of the most important provisions of the new law relate 
to the forms upon which life insurance companies must compile 
and return-their annual statistical reports. The amendments spec¬ 
ify detailed information which must be filed, in addition to that 
supplied under the former law, necessitating thirty-one additional 
pages for a proper tabulation, and several of these pages to con¬ 
tain the record of companies reporting will he increased by from 
40 to at least 100 sheets. 

While it is not possible at this time to make a definite state¬ 
ment in respect to the increase in clerical labor that will devolve 
upon the Department in the examination, auditing, and classifica¬ 
tion of the matter to be contained in the yearly statements of the 
life companies under the amended Insurance Law, it is safe to say, 


Superintendent’s Preliminary Report. 


187 


that considering the numerous extra schedules and detailed infor¬ 
mation called for by the Armstrong amendments, it will he large. 

It is stated by some of the companies that the period allowed 
for the filing of their annual returns, namely, March 1st of each 
year, does not, under the existing conditions, afford sufficient time. 
in which to compile and record the tremendous mass of figures 
called for in the schedules above referred to. 

The Insurance Commissioners of the United States annually 
meet in convention and one of the principal objects of this asso¬ 
ciation is to secure uniformity in the annual statement blanks re¬ 
quired of the companies by the various Departments. For years 
past there has been used by a large majority of the Departments 
convention editions of blanks for the various classes of companies. 
The convention of commissioners held at Washington in Octo¬ 
ber, 1906, recommended the incorporation in the life state¬ 
ment of much of the data called for by section 103 of the Insur- 
ance Law of last year. Some of the information required under 
this section was considered undesirable by the convention. Our 
Department will use the convention edition of the life blank, sup¬ 
plemented by a part B, which will require the additional data 
called for by section 103, and not incorporated in the regular 
blank. The preparation of the life blanks, incorporating therein 
all of the data required by the new Insurance Law, including a 
profit and loss exhibit, has of necessity required unusual care and 
deliberation. 

Fire Insurance. 

It will probably be the latter part of March before the state¬ 
ments of the fire and marine companies for the year ending De¬ 
cember 31, 1906, can be audited, abstracted, tabulated, printed 
and comparative figures as between 1905 and 1906 business be 
prepared and presented to the Legislature. This preliminary re¬ 
port will refer, in a general manner only, to the San Francisco 
conflagration. 

Owing to the catastrophe at San Francisco in April last and 
the unprecedented losses sustained by many fire insurance com¬ 
panies, the Department required from all such companies operat¬ 
ing in this State two special statements, the first an estimate of 
their San Francisco losses made as of May 5th, the second a 
sworn return of such losses as of June 30th. The results of these 
two returns were carried in Department circulars issued under 
dates of May 12th and July 28th. The financial condition of all 


188 


Senate Judiciaky Committee. 


of the companies shown in such circulars was based on Decem¬ 
ber 31, 1905, statements and a showing of San Francisco losses. 
A third circular, issued December 7th last, carrying financial 
statements of all Yew York fire companies and of all companies 
of other countries operating in this State, compiled from sworn 
returns as of October 31, 1906, furnishing detailed assets and lia¬ 
bilities and a statement of the San Francisco experience, showing 
gross amount of loss, amount actually paid, saving to companies 
by reinsurance, salvages and compromise, and unpaid losses. By 
agreement of the Insurance Commissioners at their annual con¬ 
vention in Washington early in October, each State Department 
was to procure sworn special statements as of October 31st from 
the companies of its State, it being understood that Yew York 
in collecting such data should include the foreign fire companies 
of other countries, as all of such companies with but two excep¬ 
tions have their United States branches domiciled in this State. 

Considering the extent of this disaster the Yew York fire com¬ 
panies, suffering a loss of over $23,000,000, the companies in other 
States of some $52,000,000, and the foreign fire companies of other 
countries of some $58,000,000—'these figures compiled from the 
Department circular of July 28th, and applying only to companies 
operating in this State — it is a source of congratulation that so 
few companies have been compelled to discontinue business and 
that the insured have received in the majority of cases such prompt 
and satisfactory adjustments. One company of this State has been 
placed in the hands of a receiver. Three companies have retired 
from business, one of which has been supplanted by a newly organ¬ 
ized company. 

The showing of companies of other States has not been unsat¬ 
isfactory. The greater portion of the loss sustained by the for¬ 
eign companies of other countries has been met by remittances 
from their home offices, without depleting their United States 
funds. Many companies have increased their capital or their sur¬ 
plus, or both, since this disaster, and the Department believes that 
it can with safety state that the insuring public of this State has 
substantially as good protection as they had before the San Fran¬ 
cisco disaster. Since that time four companies have been or¬ 
ganized under the laws of this State, with a capitalization of 
$1,700,000, and during the past year ten companies of other States 
have been admitted to transact business in this State, with a capi¬ 
talization of $2,883,617. 



Superintendent’s Preliminary Report. 


189 


Review of Insurance Conditions and Certain Provisions of 

the Present Law. 

% 

A\ ithout urging legislative action upon specific amendments to 
the Insurance Law or declaring for or against a revision of the 
same, those persons who have given attention to developments in 
insurance affairs of the past two years may he interested in such 
information as the Department can give from its limited experi¬ 
ence under new conditions. The more noticeable features of the 
present situation from the viewpoint of this Department are, there¬ 
fore, presented. 

Of the special acts of 1906 originating with the Armstrong 
Committee, chapter 123, legislating out of office the directors of 
every domestic mutual life insurance company and providing for 
the election of an entire new board of directors, while radical in 
possible consequences, did not affect the ordinary course of elec¬ 
tions of directors, except in the Mutual and the Rew York Life 
Insurance companies. A protracted struggle for the control of 
each of these great corporations has been pending for months, 
under exceptional circumstances and with no precedents to guide 
the conduct of the campaign or manner of canvassing the votes. 
It is believed a decision will be made and certified to by the 
inspectors of election after such careful examination and rigid 
calculation of the votes lawfully cast, in the election as will pre¬ 
clude questioning the result. A disputed count and legal contro¬ 
versy cannot but prove disastrous to the corporation involved, and 
injurious also to the entire business of life insurance. 

Chapter 228 prevents speculation in real estate through pur¬ 
chases and sales in the names of life insurance companies, and 
chapter 238 makes policy-holders eligible as directors whether 
stockholders or not. 

By chapter 231 the practice of rebating is made a misdemeanor. 

Chapter 239 prohibits under heavy penalties contributions by 
any corporation doing business in this State, for any political 
purpose whatever. 

Chapter 326, amending the Insurance Law generally, includes 
all other recommendations of the Armstrong Committee acted 
upon by the Legislature. 

A brief discussion of the operation of the Insurance Law for 
the purpose of calling attention to various provisions, where in 
the administration of affairs amendments, carefully considered, 
will be found beneficial to the public, will be taken up in the 
numerical order of sections: 


190 


Senate Judiciary Committee. 


§ 9. Certificate of Authorization of Superintendent — This 
section of the Insurance Code recognizes the principle that the 
Superintendent may refuse to issue a corporation certificate 
to a foreign corporation if, in his judgment, such refusal will 
best promote the interests of the people of the State. It is ap 
plicable to all foreign insurance corporations with the exception 
of fraternal orders. There seems to be no good or sufficient reason 
why fraternal orders should have this special exception. Eliminat 
ina* from this section the sentence reading, 

O 

“ This section shall not apply to any existing domestic in¬ 
surance corporations or to fraternal associations organized 
on the lodge system.” 

will correct this apparent discrimination in favor of fraternal 
orders. (See section 57.) 

§ 11. Examination by Superintendent.— As no further incor¬ 
porations can be perfected under article VI of the Insurance 
Law, it would seem advisable to eliminate from the first sentence 
of said section the following: 

“ except in the case of corporations proposing to organize 

under article VI of this chapter.” 

« 

§ 12. Minimum Capital Stock.— This section regulating the 
minimum capital stock of the various classes of insurance cor¬ 
porations, should have incorporated therein a new feature. The 
capital stock is a liability. Permitting the company to organize 
with only a capital stock, results in an impairment thereof the 
moment any volume of business is written. To avoid this con¬ 
dition, many companies now organizing dispose of the capital at 
a premium, thus bringing in a surplus at the time of incorporation. 
It would seem proper for the Insurance Code itself to require a 
surplus at the time of organization by disposing of the capital 
at a premium. 

§ 13. Deposit of Securities.— Under the provisions of this sec¬ 
tion a company may deposit with the Department bonds and 
mortgages on improved unincumbered real property in this State, 
worth 50 per centum more than the amount loaned thereon. 
Deposit securities of this character necessitate an examination 
by Department counsel of sufficiency of title to the mortgaged 



Superintendent’s Preliminary Report. 191 

• 

premises and by Department appraisers of the values of the 
property. Further, fire insurance policies must be carried covering 
the buildings on the property, which must be properly assigned to 
the Superintendent in trust, etc. The responsibility entailed upon 
the Department in receiving mortgages as deposit securities is 
not desirable. This class of securities should be eliminated for 
departmental deposits. 

. § 16. Investment of Capital and Surplus.—This section requires 
that the minimum capital of a domestic insurance corporation 
shall be held in deposit securities. This feature of the law should 
be maintained and if section 13 is amended by eliminating the 
right to deposit mortgages with the Department, the company 
should have the privilege of holding mortgage loans as a part 
of its minimum capitalization. The first sentence of this section 
should be amended by eliminating therefrom the word “ domestic.” 
It is rightfully claimed that a foreign corporation of another 
State should have minimum capital investments of the same 
general character required of a like corporation of this State. 
The corporations of other States should be permitted, however, 
when investing in deposit securities, to purchase the same class of 
investments in the home State which may be held by a corporation 
of this State. The Department has made this requirement of 
other State corporations applying for authorization to transact 
business in blew 7 York, believing it to be good public policy to 
make such a requirement. It is preferable, however, that this 
shall be a statutory enactment rather than a departmental ruling. 

§ 22. Reinsurance.— The amendment of 1904, chapter 759, 
to section 22 of the Insurance Law, relating to reinsurances was 
not approved by the Department. Section 22, both before and 
after the amendment of 1904, recognizes the necessity of re¬ 
insurances, credits being allowud when placed in authorized com¬ 
panies. Prior to the amendment the original or insuring company 
and the reinsuring company, were both required to maintain an 
unearned premium reserve based upon the gross premium charged 
in the policy. The amendment, however, penalizes the original 
company and extends to the reinsuring company the benefit of 
such penalization. The original company must now hold as 
heretofore an unearned premium reserve based upon the gross 
premium charged in the policy, which premium is not actually re¬ 
ceived by it, as commissions have to be paid to the agent for the 




192 


Senate Judiciary Committed, 


procurement of the business, while the reinsuring company is 
only charged with an unearned premium reserve on the net or 
actual premium received by it. The difference between the net 
premium received by the reinsuring company and the gioss pre¬ 
mium written in the policy constitutes an additional charge 
against the original or insuring company, it being requiied to 

hold the unearned premium thereon. 

There seems to be no good nor sufficient reason why reinsurance 
companies should not be required under the law to maintain the 
same proportion of premium liability as is required of the direct 
insurance company and thus be held to the same strict account¬ 
ability as in the case of the direct company. The necessity for 
reinsurances cannot be questioned. As a matter of fact this neces¬ 
sity is so great that several large companies authorized to transact 
business in this State, are conducting nothing but a reinsuring 
business. These companies have charged against them as a lia¬ 
bility on account of unearned premiums an amount less than 
would be charged against them if they were doing a direct 
business. 

It would be fair to all companies to re-enact section 22 sub¬ 
stantially as it stood prior to the amendment of 1904. 

§ 24. Limitation of Risk.— This section now recognizes the 
right of an insurance corporation incorporated under the laws of 
any other State of the United States doing business in this State 
to expose itself without the State to a loss on any one risk or 
hazard to an amount exceeding ten per cent, of its capital and 
surplus, while in the State of Yew York it is only permitted to 
assume such a risk or hazard to an amount representing ten per 
cent, of its capital and surplus. Particular attention has been 
called to this feature of the law in connection with the business 
of surety corporations. Some of the most thoughtful underwriters 
in this line of business are of the opinion that these companies 
should be restricted at all points as they are in this State. It is 
the judgment of the Department that an amendment of this char¬ 
acter to this section of the law is most desirable. 

§ 27. Dunds and capital of insurance corporations incorporated 
outside of the United States,— It is desirable that the latter part 
of the first sentence of this section be so amended as to read: 
“ and not less than $200,000 if a life insurance corporation, and 
not less than $200,000 if a casualty insurance corporation.” 



Superintendent’s Preliminary Report. 


193 


citizens of tlie United States insured in foreign insurance cor¬ 
porations of other countries should be safeguarded by proper de¬ 
partmental deposits. It is the spirit of the law to have such de¬ 
posits. I he present wording of this section has resulted in a 
court decision which, in a measure, destroys the safety intended 
to be given by deposits of this character in that it has been held 
that a foreign life company of another country on a single deposit 
of $200,000 may assume hazards against personal accident and 
health without an additional deposit. Amending the section as 
suggested will require such a corporation carrying on more than 
one line of business to make an additional deposit. A domestic 
corporation with more than one line of business must have an 
additional deposit. 

§ 31. Certified copy of Superintendent’s certificate and of 
statement to be filed in the clerk’s office.— This section is an- 
plicable to all foreign, corporations for the first year they are 
authorized to transact business in this State. The provisions of 
the section as to original certificate of authority to the aa’ent and 
the filing of copy in the county clerk’s office and publication of 
the financial statement in the State paper, should be maintained. 
The requirement, however, that — 

“ a certified copy of the statement required by this chapter 
to be filed in the office of the Superintendent ” 

be filed in the office of the clerk of the county where the agent re¬ 
sides is unnecessary; it in no sense of the word safeguards the 
public and it entails upon 'the Department much unnecessary 
labor. Frequently fire companies of other States in the first year 
of their authorization toi transact business in this State establish 
an agency in each county in the State, necessitating the furnish¬ 
ing of copies of the statement on admission for each of such 
counties. 

§ 42. Stockholders to make good impairment of deficiency.— 
This section now contains the following provision: 

“ For any losses accruing upon new risks taken after the 
expiration of the period limited by the Superintendent in any 
such requisition and before such impairment or deficiency 
shall be made up, the directors of the corporation shall be 
jointly and severally individually liable to the extent 
thereof.” 

13 




194 


Senate Judiciary Committee. 


It is reasonable that, this liability of directors should commence 
with the making) of tlici requisition rather than to recognize a de¬ 
lay until after the expiration of the requisition which may not be 
made good. This result can be accomplished by amending the 
language so as to read — 

“ For any losses accruing upon new risks taken after such 
requisition is made, etc., etc.” 

§ 44. Reports of Corporations.— This section requires each 

insurance corporation within the time specified to file with the 

Department a showing of its condition on the thirty-first day of 

.December then next preceding. Fire and marine companies have 

until the first of February in which to make their annual returns; 

life and other insurance corporations until the first of March. 

Fire companies with established agencies all over the country 

can hardly furnish a statement of their condition as of December 

31st, within one month. Life companies with established agencies 

all over the world certainlv cannot furnish such statements within 

«/ 

two months. It does not seem wise to extend the time in which 
the statements can be filed with the Department. The condition 
can be remedied by requiring the companies to file annual state¬ 
ments, showing their condition, as per the books, at the home 
office, on the thirty-first of December. 

§ 57. Application of article limited.— If the suggestion made 
regarding section 9 of the Insurance Code meets with approval, 
then section 57 • should be amended by eliminating in the first 
sentence the words “seven and” and changing the word “ articles ” 
to “ article,” so that fraternal orders will not be relieved from 
the provisions of article I of the Insurance Law as they now are. 

§ 70. Incorporation — Proposed repeal of subdivision 8.— Sub¬ 
division 8 of this section under an opinion of the Attorney- 
General is surplusage, the Attorney-General holding that no rights 
can be acquired by a corporation through this subdivision that 
cannot be acquired by an incorporation under the provisions of 
the previous subdivisions; that if another construction were placed 
upon subdivision 8 there would be no necessity for the previous 
subdivisions. This subdivision leads to more or less confusion 
and for the reasons stated should be repealed. 






Superintendent’s Preliminary Peport. 


195 


Proposed transfer of subdivision 9 to section 170.— At the last 
session of the Legislature a hill was passed which proposed to 
amend the Insurance Law bv transferring subdivision 9 of section 

*y O 

70, providing for 

Guaranteeing the validity and legality of bonds issued by 
any state, or by any city, county, town, village, school dis¬ 
trict, municipality or other civil division of any state or by 
any private or public corporation ” 

to article V of the Insurance Law, § 170, as a new subdivision 
under title guaranty insurance. Owing to the form of the bill 
it was not signed by the Governor. The advocates of this propo¬ 
sition claim that this particular line of business more properly 
belongs in article V than in article II, as one of the casualty 
subdivisions of section 70. This contention is worthy of con¬ 
sideration. The unearned premium reserve required to he main¬ 
tained hy casualty insurance corporations, by section 86 of the 
Insurance Law, equal to the unearned portions of the grosss pre¬ 
miums charged for covering the risks computed on each respec¬ 
tive risk from the date of the issuance of the policy, substantially 
makes subdivision 9 of this section of the Insurance Law inopera¬ 
tive. A transposition of this character properly safeguarded 
would make it possible to incorporate an insurance corporation 
guaranteeing the validity, etc., of bonds issued by any state, 
municipality, etc. 

Automobile Insurance.— Inquiries received at the Department 
indicate a growing demand for protection of this character. It 
seems to be the desire of some of the insurance underwriters to 
have the privilege of protecting automobile owners from the fol¬ 
lowing hazards: 

Personal accident to the owner; 

Personal accident to his engineer or any passenger; 

Personal accident to any other person injured by his car; 

Property damage to the car by reason of collision or other 
accident; 

Property damage to another car or vehicle by reason of collision 
with car insured. 

All of these hazards properly fall under the business of casualty 
insurance. Personal injury to the owner may now be provided 



196 


Senate Judiciary Committee. 


for under subdivision 2 of section 70; to bis employee or ajiy other 
person under subdivision 3. The various subdivisions of this 
section, however, do not contemplate assuming a property damage 
hazard except as property may be damaged incident to burglary, 
plate glass breakage, or by reason of steam boiler explosions. It 
may be desirable by express provison in the law to recognize 
damages to property in connection with the running of auto¬ 
mobiles. The privilege should certainly be limited to the use of 
automobiles, and the property damage to the car, or caused by the 
car to other property, should be distinctly provided for in a new 
subdivision of section 70. If a contract is to be entered into 
indemnifying against personal accident, employers’ liability and 
property damage in connection with use of automobiles, the cor¬ 
poration issuing such contract should be compelled to have the 
capitalization contemplated under section 12 for three lines of 
business and the deposit required under section 71 for three lines 
of business. This contemplated line of insurance is of such a haz¬ 
ardous character as to require proper safeguards as to capitaliza¬ 
tion and deposit. Under the existing law if this suggestion were 
acted favorably upon, two policy contracts would have to be writ¬ 
ten. The law might properly be amended so as to permit a policy x 
to embrace the risks specified in subdivisions 2 and 3 and that sub¬ 
division providing for indemnity against property damage inci¬ 
dent to the use of automobiles. 

§ 84. \ aluation of Policies.— The principal amendment made 
to this section is that which provides that the legal minimum 
standard of valuation for polices issued on and after January 1, 
1907, shall be in accordance with the select and ultimate method, 
American experience table of mortality, with interest at three 
and one-half per centum per annum. 

This method of valuation has been rejected by the “ Committee 
of Pifteen appointed by the Chicago Conference of Governors, 
Attorney-Generals and Insurance Commissioners, held February 
1 and 2, 1906. This committee expressed themselves in favor of 
the adoption of one year “ preliminary-term ” valuation. 

Fiom the leport of the commission to recodify the Insurance 
Laws, made to the Governor of the Commonwealth of Massa¬ 
chusetts, the following is quoted: “ We believe that Massachu¬ 

setts should not yield the position of highest standard by adopt¬ 
ing either the preliminary-term method or the compromise, which 
has at present the sanction of Flew York.” 


Superintendent’s Preliminary Report. 


197 


While it seems to be extremely improbable that the select and 
ultimate method of valuation will be adopted by any other State, 
it is suggested that no change be made in this section so far as it 
relates thereto. Rew York life insurance companies doing busi¬ 
ness in other States or countries will have to meet the require¬ 
ments of such other States or countries in relation to reserve 
valuations, and in order that they may do this their reserves will, 
as formerly, be based on standards higher than the minimum 
named in the section. 

The provision, “ and no policy with level premiums issued after 
said date shall be valued as term insurance for the first policy 
year,” should be amended by the insertion of the words “ written 
or ” after the word “ be.” 

§ 87. Contingency Reserve.— The sufficiency of contingency re¬ 
serves computed according to the rules laid down in the section 
has been questioned. However, provision is made for accumulat¬ 
ing and maintaining a contingency reserve in excess of the limit 
for a prescribed period not exceeding one year under any one 
permission. 

It is recommended that this section be so amended as to provide 
that the contingency reserve shall be a fixed percentage of 10 per 
cent, of the reserve liability besides the aggregate market value 
margin in excess of par of all bonds held; provided, however, that 
a company shall not be required to apportion or distribute the 
surplus, except such part thereof as may be in excess of 
$100,000. This is the recommendation which has been made by 
the Massachusetts commission to recodify the Insurance Laws of 
that State, and it is believed will better safeguard the interests 
of policy-holders than the rule laid down in the section as it 
now stands. 

§ 88. Surrender value of lapsed or forfeited policies.— The 
amendments to this section applying to policies issued on and 
after January 1, 1907, provide that the surrender values shall 
be based on the standard adopted by the company for the valuation 
of the policies, instead of the American experience table of mor¬ 
tality with interest at four and one-half per centum per annum. 
Waiver of the provisions of the paragraph relating to policies 
issued on and after January 1, 1907, is forbidden, With the in- 


198 


Senate Juetciaby Committee. 


corporation of surrender values in the standard life insuiance pol¬ 
icy forms a fruitful source of complaint will be done away with. 

§ 89. Discriminations Prohibited.— The amendment to this 
section provides that a higher premium than that for a one yeai 
term insurance shall not be charged for such insurance when writ¬ 
ten in combination with another form. An absolute prohibition 
of the preliminary term contract would seem to be of greater force. 

§ 91. Certificate of Authority of Agents.— The last sentence 
of this section providing for the revocation of an agent’s license 
refers to “ the preceding section.” The preceding section relates 
to discriminations against colored persons. The reference is in¬ 
tended as one to section 89, Discriminations Prohibited. To cor¬ 
rect this error the words “ the preceding ” should be eliminated 
and “ 89 ” should be inserted after “ section.” 

§ 94. Election of Directors.— To create a scheme for an elec¬ 
tion of directors of a corporation by its policy-holders scattered 
throughout the entire world is an undertaking of such magnitude 
and difficulty as to be realized only by those engaged in the work. 
In the plan devised by which policy-holders might sustain the 
management of their companies or declare for a change of ad¬ 
ministration, many provisions have been found indefinite and con¬ 
ditions have developed which could not have been foreseen by the 
framers of the law, as the experiment is the first election of its 
kind and there were no precedents even by analogy. The record 
here considered is complete to the closing of the polls December 
18, 1906, from which date a separate review may be desirable when 
the canvass shall have been finished and the facts relating thereto 
are obtained. 

The procedure for filing lists of policy-holders, nominating can¬ 
didates, furnishing policy-holders with information and instruction 
and securing a return of ballots has been so construed and en¬ 
forced as to have produced no serious friction or complications 
in the work, although receiving criticism for defects of supposed 
omission in the drafting, by which alleged advantages were pos¬ 
sible in aid of certain nominees. The Legislature may deem it 
best to allow the present section to stand without amendment in 
preference to the risks of further clauses which might unsettle 
rather than clarify provisions tested and construed in practice. 
If, however, amendments are to be submitted, experience suggests 



Superintendent’s Preliminary Report. 199 

among modifications not affecting the general plan but important in 
its practical operation the following: 

It is questionable if regulations for filing and maintaining lists 
of policy-holders by companies should remain in the present form. 

All ambiguity should he removed from provisions relating to 
the application of section 94 to election of directors in domestic 
stock life insurance corporations. 

Voting by proxy should be eliminated if the feature of voting 
by mail is retained. 

Ballots returned by policy-holders should be to one address and 
in sealed envelopes. 

The Superintendent of Insurance or other designated public 
officer should co-operate in or control the receiving of ballots by 
mail and their custody until delivered to the inspectors of election 
on the date of the election. 

If the ballot received by mail is executed in conformity to the 
statute the vote of the policy-holder should not be invalidated by 
a defective endorsement upon the envelope or wrapper enclosing 
such ballot. 

A definite date should he fixed as the first when a ballot can be 
executed. 

Appointment as inspector of election should not be restricted to 
policy-holders of the company. 

At the hour of closing the polls if voters are in attendance or 
ballots are offered, provisions should he made for inspectors of 
election to accept all ballots then awaiting an opportunity to he 
cast. 

The law should state whether the number of policy must he in¬ 
serted in the ballot by a policy-holder in his own handwriting. 

Provision should be made for removing the name of a person 
from a ticket when placed there as a candidate against his will 
or when improperly printed thereon as a nominee. 

To some extent it appears equitable that the principle of minor¬ 
ity representation upon every ticket should be acceded to. 

§ 97. Limitation of Expenses.— This is an entirely new section 
of the law and provides for a limitation of expenses of domestic 
life insurance companies, which limitation is made to apply to 
foreign life insurance companies doing business within this State. 
It has given rise to a very large correspondence, all of which 
tends to show the intention of the companies to live strictly within 



200 


Senate Judiciary Committee. 


the limitations of the section. While a few companies have felt 
constrained to withdraw from the State on account of its restric¬ 
tions, it is believed that a fair trial of the law as it now stands will 
prove it to be for the best interests of all concerned. 

§ 101. Standard forms of policies.— In conformity with pro¬ 
visions of this section, the four standard life insurance policies 
set forth therein were amended prior to October 1, 1906, and were 
promulgated on that day. 

The section makes provision for the approval of forms of pol¬ 
icies other than those mentioned therein, and a number of policy 
forms having been submitted by a committee of actuaries, members 
of the Actuarial Society of America, and by certain life insurance 
companies, a hearing was held at the Hew York office of the De¬ 
partment on December 27,- 1906, at 11 o’clock, a. m. Of the 
various policy forms presented at this hearing, the following which 
are general in their nature and needed to meet the legitimate de¬ 
mands of the insuring public, have been approved: 

Life Annuity. 

Temporary Annuity. 

Deferred Annuity. 

Last Survivor Annuity. 

Survivorship Annuity. 

Sub-standard forms of Ordinary Life, Limited Payment Life 
and Endowment. 

Paid-up Life Insurance. 

Paid-up Endowment. 

Pure Endowment. 

Yearly Kenewable Term. 

Ordinary Joint Life Insurance. 

In addition to standard forms provided for by the section, Hew 
\ork life insurance companies u may issue and,deliver in any 
other State or in any foreign country or may issue in this State 
for delivery in any other State or any foreign country any form 
of policy not inconsistent with any of the provisions of the Insur¬ 
ance Law.” 

Under date of September 1, 1906, the Attorney-General, after 
reviewing the history of the insurance legislation of the last ses¬ 
sion, held that foreign life insurance companies, u who already 
have licenses to do business within this State ” * * * “ arc 



Superintendent's Preliminary Peport. 201 

not lequired to conform with the standard forms of policy, pro¬ 
vided for in the act.” 

It will he seen that here is an anomalous condition of affairs. 
Within this State, Hew York life insurance companies may de- 
li\ er only those forms of policies which in accordance with the 
provisions of the section have received the approval of the Super¬ 
intendent of Insurance; outside of this State they may deliver 

any form of policy not inconsistent with any of the provisions of 
the Insurance Law,” while the life insurance companies of other 
States may continue the delivery within this State of policy con¬ 
tract not in entire harmony with our law. 

It remains to be seen whether, or not, the apparent discrimina¬ 
tion against our own State companies is really harmful. 

§ 102. Companies issuing participating policies not to do a non¬ 
participating business.— The provisions of this section when first 
introduced in the Legislature, applied to all life insurance com¬ 
panies doing business within this State. After the public hearing 
before the Joint Committee of the Senate and Assembly it was 
amended to apply onlv to domestic life insurance companies. 
This seems further discrimination against our own State com¬ 
panies. 

/ 

Business Assessment Associations. (Article VI.) 

While the legislation of 1906 has made it impossible to organize 
additional assessment associations in this State or to authorize 
such associations from other States to transact business in Hew 
York, the Department is confronted by a situation of difficulty in 
supervision and which will result in considerable loss to the insur¬ 
ing public. Article VI of the law codifying chapter 175 of the 
Laws of 1883, never contemplated that associations of this char¬ 
acter should issue a contract in the nature of an endowment policy 
or that they should featurize dividend payments. Within the past 
year certain associations operating under this article of the law 
have issued certificates providing for cash dividend payments at 
the expiration of a five-year period of membership. Unquestion¬ 
ably these contracts have resulted from the apparent success of 
three fraternal orders operating in this State under article VII 
of the Insurance Law, which have under the provisions of said 
article the right to issue these so-called endowment certificates, a 
right not obtainable since the amendment of 1903. The views of 


202 


Senate Judiciary Committee. 


the Department as to the safety of their plan are set forth in the 
fraternal report of the year 1906 to the Legislature. I he Depart¬ 
ment questioned the validity of these contracts. Attorneys for the 
two associations principally interested, claimed that under section 
214 recognition was given to the payment of dividends out of 
surplus accumulations or reserve fund by an assessment associa- 
tion; that the right to pay such dividends carried with it the right 
to provide for five-year distributions. The Attorney-General has 
sustained the contention as to dividend payments. While the 
Department’s records show that section 214, codified from the act 
of 1883 as amended in 1887, by the language of the act of 1887 
was intended to give to the Mutual Reserve Fund Life Association 
the right to meet its obligations under old contracts providing for 
bond statements and was codified in then existing law, it is un¬ 
fortunately broad and under the opinion of the Attorney-General 
may be used to accomplish the undesirable result of permitting a 
business assessment association, not permitted to issue a definite 
contract for a fixed or definite premium, not required to charge 
an adequate or sufficient rate, nor to create and maintain a proper 
statutory reserve, and organized within the spirit of the Insurance 
Law solely to furnish assessment term insurance — to pay cash 
dividends at five-year periods to certificate holders paying insuffi¬ 
cient rates for such insurance. In this connection it should be 
remembered that under the Armstrong amendment all old line life 
insurance companies with statutory reserves and adequate rates 
are required to ascertain and distribute their surplus annually 
and not otherwise. In the opinion of the Department this objec¬ 
tionable provision in section 214 of the Insurance Law should b.} 
eliminated. 

§ 207. Visitation by Superintendent; proceedings to restrain 
corporation from doing business.— A reference to this section 
shows an amendment adopted by chapter 569, Laws of 1905, 
limiting the expense of management to 35 per centum of the cash 
income actually received from premiums, assessments, membership 
fees, etc. A reference to the act of 1905, section 3 thereof, dis¬ 
closes the fact that an assessment association operating solely as 
a casualty association or with a casualty department, or transact¬ 
ing industrial or health insurance, exclusively where the maximum 
policies do not exceed the sum of $200, is relieved from the pro¬ 
vision limiting expenses to not more than 35 per centum of the 



Superintendent's Preliminary Report. 203 

i*ash income as provided in section 207. Tims an assessment 
casualty association or such an association with a casualty depart¬ 
ment, or an assessment life insurance association operating on an 
industrial plan, can use any percentage of its cash income for the 
expense of management. There is no good reason why assessment 
associations of this character should not be required to carry on 
their business with a restriction as to the amount of their expenses. 
It is recommended that section 3, in so far as it relates to associa¬ 
tions subject to the provisions of article VI of the Insurance Law, 
be repealed. 

The Superintendent of Insurance lias been engaged for the past 
few months in an effort to regulate the forms of contracts issued 
by assessment life insurance associations operating under the pro¬ 
visions of article VI of the Insurance Law, together with their 
by-laws and advertising literature. The plan of regulation was 
to take up the assessment life insurance associations,,alphabeti¬ 
cally, but some have been taken up out of their order by reason of 
flagrant violations of the provisions of law as bearing on the form 
of contract and by-laws, which have come under the Department’s 
immediate notice. 

It has been found that the majority, if not all, of the certificate 
contracts in use by these corporations did not comply with the 
spirit of the law of their incorporation and that in most instances 
material provisions binding on the assured were invisible among 
conditions and agreements printed on reverse side of the contract, 
or in by-laws the average layman seldom reads, instead of being 
printed on the face of the contract. In all such instances the 
Department has required the corporation to change the contract 
in this respect, so that all conditions of binding force on the 
assured shall be printed in clear and unmistakable language 
on the face of the contract. 

A number of these corporations had incorporated in their con¬ 
tracts provisions for the payment of cash surrender values with¬ 
out being in the financial condition required by section 205 of 
said article, together with a paid-up insurance feature. They have 
been called upon to discontinue the issuance of these unlawful 
agreements. The cash surrender value provisions incorporated in 
the contracts of certain of these associations were not alone unlaw¬ 
ful, but, when carefully studied by those familiar with technical 
terms, utterly meaningless, except to those who believed them to 
be valid agreements from the positive assurances of unscrupulous 
and designing agents. A paid-up insurance contract issued by an 


204 Senate Judiciary Committee. 

assessment life insurance association calls for no comment on the 
question of its complete antagonism to the spirit of this plan of 
insurance. 

The advocates of the assessment form of insurance proclaim 
its advantages as opposed to that of level premium or old line 
insurance, which is declared to be wrong in theory and excessive 
in cost, hut in the progress of regulating or attempting to regulate 
the advertising literature of many of these assessment life insur¬ 
ance associations the greatest difficulty has been found in inducing 
them to withdraw or change literature which clearly shows an 
intent to win confidence on the basis of level premium or old 
line life insurance. The experience of the Department also shows 
that some agents of assessment corporations, by reason of the 
difficulty of holding a person to responsibility for an oral declara¬ 
tion, go still further in practising this deception. 

One of these associations, entitled to recognition as a going 
corporate entity, which issued a featured, five-year distribution 
cash coupon contract apparently promising the sum of “ Three 
Hundred and Seventy-five Dollars ” to be paid at the end of five 
years after there has been paid in in assessments but One Hundred 
and Eighty Dollars, had, on December 31, 1905, a balance of net 
assets amounting to $298.39, with 125 certificates of membership 
in force, unmatured liabilities to the amount of $500 and $150 
of assets called for, so that a marshaling of these assets, includ¬ 
ing the sum called for in assessments after deducting its un¬ 
matured liabilities, leaves a deficit of $51.61. 

The Superintendent of Insurance lias been for six months en¬ 
deavoring to have this corporation discontinue the issuance of 
such a form of contract, but the question is still undetermined. 
The Department cannot, under the slow procedure outlined in 
section 207 of the Insurance Law, accomplish any satisfactory 
results. The other corporation issued in the year 1906 several 
of this kind of certificate contracts featuring a five-year cash 
coupon return, but has now adopted a form of certificate which 
is in harmony with the construction of section 214 of article VI 
as held by the Attorney-General, August 31, 1906, permitting 
payment of cash dividends, and conforms to the regulations of 
this Department. 

There is no express power given to the Superintendent of In¬ 
surance to prescribe the precise form of contract which an assess¬ 
ment life insurance association may issue, and there is nothing 
in article VI directly bearing on the subject of by-laws. 


Superintendent’s Preliminary Report. 


205 


The above will indicate that some protection might be afforded 
the insuring public if the statute should require that every cer¬ 
tificate contract hereafter written by associations of this character 
have printed in large type across the face the words “ assessment 
association ” after its corporate title. 

The question might he asked, why has there not heretofore been 
adopted a strictly formulated plan to regulate the contracts, by¬ 
laws and advertising matter of this class of corporations? There 
is nothing in the statute authorizing such action by the Superin¬ 
tendent of Insurance, and the absence of clearly defined power 
and the failure of recommendations made by former superintend¬ 
ents for amendments to this article which would have permitted 
a closer supervision, have rendered futile every attempt to hold 
this class of corporations to the spirit and purpose of the law. 
The Insurance Department is. accomplishing partial success along 
these lines under implied powers of the statutes granting super¬ 
vision and regulation of all insurance corporations and associa¬ 
tions. Legislative attention to the correction of persistent evils 
above indicated will protect large classes of uninformed honest 
citizens from financial loss, and the humiliation of feeling that 
they have been swindled under sanction of law. 

Fraternal Orders. (Article VII.) 

The experience of the past few years in some half dozen of the 
leading fraternal orders has demonstrated that the rates charged 
have been entirely inadequate. As a result the beneficiaries of 
those members dying in the earlier years of these institutions have 
received excess benefits disproportionate to the payments made, 
while the persistent members have had to bear the burden of such 
excess payments in addition to the necessary increase in their 
assessment rates with advancing age. The membership in these 
orders running into the hundreds of thousands representing par¬ 
ticularly the wage-earner, should have protection not contained 
in the existing Insurance Law. There can be no dispute as to 
the desirability of a sufficient and adequate rate. Whether such 
a rate can be established for existing orders with their vast mem¬ 
bership and present organization, is perhaps doubtful. The fra¬ 
ternal orders, apparently, will have to work out their own sal¬ 
vation and the membership submit to that condition which has 
confronted many of their predecessors after years of membership, 
namely, an advance in rates which will compel many of the older 


206 


Senate Judiciary Committee. 


members to drop their insurance. "W liile it may not be possible 
to correct conditions in the existing orders, it is practicable and, 
in the judgment of this Department, it is within the province of 
the Legislature to safeguard the interests of future insurers by 
requiring new fraternal incorporations to charge adequate rates 
by express provision that a rate not lower than that of the Na¬ 
tional Fraternal Congress table of mortality must be paid, and 
providing further, that no order of another State or country can 
have authorization to transact business in this State unless its 
rates on its entire membership are based on such a recognized 
table. The result of such proposed legislation will in our judg¬ 
ment be beneficial to the existing orders as they, when reaching 
a point where by their own experience an adequate rate must be 
charged, will not be confronted, as they now are, with newly 
organizing orders charging insufficient rates. 

The Superintendent of Insurance is also engaged in an endeavor 
to regulate the forms of contract, by-laws and advertising liter¬ 
ature of this class of corporations. In some instances they have 
written contracts which in the opinion of the Department are 
misleading and ultra vires, and have circulated literature calcu¬ 
lated to deceive as to the kind of corporation represented, but they 
are being brought within the spirit and letter of the law. The 
by-laws of many contain provisions in direct conflict with law, but 
these are being eliminated as rapidly as met. It may be added 
at this point, also, that article VII does not give to the Superin¬ 
tendent of Insurance express power to exercise the close super¬ 
vision over these orders which ought to accompany a supposed 
official responsibility. 

Fraternal Endowment Orders. (Article VII.) 

In a preceding, paragraph of this report in commenting upon 
business assessment associations and an attempt on the part of 
several of them to start an endowment business, reference is made 
to the departmental report of the year 1906 as applying to the 
endowment plan by fraternal orders, which opinion has been 
strengthened by subsequent experience and may appropriately be 
quoted and reaffirmed here: 

“ Included in the fraternal portion of this report ” (the 
New York insurance report, dated July 23, 1906) “ are 
abstracts of the annual statements of three orders which, by 


Superintendent’s Preliminary Report. 


207 


direct provisions in their articles of incorporation under 
article YII of the Insurance Law, have acquired the right to 
pay benefits to living members at the expiration of a five- 
year continuous period of membership. 

“ This right to pay what is generally understood to be 
endowment benefits was incorporated in the fraternal law at 
the time of the codification of the Insurance Laws of 1892. 
It appears from the records and from various annual reports 
made to the Legislature since that time, that the Department 
was opposed to this provision of the law, and the amendment 
of 1903, chapter 450, eliminating from article VII the right 
to incorporate further orders of this character, was passed 
upon its recommendation. 

“ The Department is daily in receipt of communications 
from citizens of this and other states regarding these orders, 
the safety of their plans, and the probability of their fulfill¬ 
ing their contracts as understood by the general public; the 
writers assuming that such orders are under a supervision 
which enables the Department to pass upon their solvency. 

“ The Department is compelled to state that orders operat¬ 
ing under the provisions of article VII of the Insurance 
Law, have with it no deposits; that they are not required to 
hold reserves for the protection of their certificate holders; 
that they have no standard of solvency; that contracts issued 
‘by them do not guarantee the payment of a stated sum at the 
end of a five-year period, or any definite period of member¬ 
ship ; that their contracts usually contain a provision that the 
benefit to be paid at the expiration of a fixed period of mem¬ 
bership shall be ‘ an amount not to exceed ’ the sum stated; 
that the payment of any amount which may be in hand at the 
end of the stated period would be a fufillment of their con¬ 
tracts; that the attempt to pay such benefits by fraternal 
orders is, in the judgment of the Department, unwise, and 
that any institution endeavoring to write such contracts is 
more than apt to meet with financial disaster. An examina¬ 
tion of the rates collected will show that they are inadequate 
to produce the amounts which the orders are supposed to 
promise to pay. 

“ It cannot be denied that these three orders, as shown by 
their annual statements carried in this report, have had 
during the past year a phenomenal growth. It is also appar- 


208 


Senate Judiciaby Committee. 


ent that accompanying this growth there has been an expense 
of management which is in excess of the ordinary expense 
incident to the conducting of the business of fraternal insur 
ance. While these orders, during the year, have increased 
their assets, their membership, and the amount of insurance 
in force, a careful review of their statements does not indicate 
a healthy or conservative growth, or a financial condition 
which would warrant any other statement than that set forth 
above, namely, that it is the opinion of the Department that 
they are 1 more than apt to meet with financial disaster. 

Town and County Co-opeeative Fibe Insubance Associa¬ 
tions. (Article IX.) 

This class of corporations is not under the jurisdiction of the 
Superintendent of Insurance. They are required to report to the 
Secretary of State annually, but such reports as they do make to 
that official are of the most meager description. They are merely 
accepted and filed, no matter in what form they may be presented. 

Doubtless there are many of these corporations which serve a 
useful purpose, but their incorporation is used in some instances 
as a vehicle by which unscrupulous persons mulct property owners 
in the rural districts, as has come to the notice of the Superin¬ 
tendent of Insurance through an action brought by the Attorney- 
General to annul the charters of a number of fraudulent concerns. 

The insuring public direct a large number of inquiries to the 
Insurance Department with a view of obtaining information as 
to the financial standing of this class of corporations, which in 
turn refers them to the Secretary of State, in whose office such 
reports are required by law to be filed. The Secretary of State 
has in this respect no official sources of inquiry and there is no 
public office where information may be obtained as to the financial 
standing of town and county co-operative fire insurance corpora¬ 
tions. 

Article IX of the Insurance Law which regulates town and 
county co-operative fire insurance corporations, does not call for 
the submission of articles of incorporation to the Attorney-General 
before the same are filed in the office of the Secretary of State. 
In the investigation conducted by the Attorney-General’s office 
into the affairs of this class of corporations, it has been demon¬ 
strated that if persons organizing the same were required to sub¬ 
mit the articles of incorporation to the Attorney-General, there 
are a great number of cases where they would have been prevented 


Superintendents Preliminary Report. 


209 


from filing the papers, as the fraudulent character of the proposed 
a gg re g a tions would have been immediately discovered. 

Amendments to the Penal Code. 

The following suggested amendments to the Penal Code would, 
if adopted, aid in the general administration of the Insurance Law: 

Making it a misdemeanor for any insurance association or cor¬ 
poration to circulate through any person or agent advertising 
literature, indicating that it can transact any business other than 
that of the character permitted by its law of organization. 

Making it a misdemeanor for any officer of an insurance cor¬ 
poration to allow, permit or authorize the issuance of any con¬ 
tract of insurance before the corporation is fully organized. 

Making it a misdemeanor for any person to maintain or con¬ 
duct an office in this State for a foreign insurance corporation 
when such foreign insurance corporation has no authority to 
transact business in the State of Hew York, by not having com¬ 
plied with the provisions of the Insurance Law regulating the ad¬ 
mission of such corporation. 

In the foregoing comments have been included the principal 
points of the Insurance Law where, in the judgment of the Super¬ 
intendent, there is cause for improvement, as disclosed in the 
everyday business of the Department. Special interests and in¬ 
fluence may or may not have caused certain inconsistencies and 
defects in the statute and may heretofore have prevented amend¬ 
ments from time to time. Having expressed conclusions frankly 
upon the facts as carefully observed and studied, the Superin¬ 
tendent is confident that if all or any of the changes recommended 
are approved by the Legislature and Governor, such action will be 
for a betterment of present conditions and the more equitable, 
conservative and efficient supervision of insurance affairs in the 
State. 

Respectfully submitted, • i 

f , OTTO KELSEY, 

P Superintendent. 

The portion of Exhibit 46 to which reference was made reads 
as follows: 

Fraternal orders (Article VII), pages* 33 and 34, and Frater¬ 
nal Endowment orders (Article VII), pages 35 and 36, was read 
by counsel. 


210 


Senate Judiciary Committee. 


Q. This report to which your attention has been directed, Mr. 
Kelsey, is that any part of the annual report of the Superintend¬ 
ent ? A. It will he this year, yes, sir. 

Q. You prepared that when? A. In January. 

Q. For what purpose ? A. That the Legislature might be ad¬ 
vised in the insurance affairs — of the affairs of the Insurance De¬ 
partment. The practice as I have already stated of the reports 
being filed for business as of December 31st, the fire by the 1st of 
February and all other classes bv the 1st of March, and the print¬ 
ing or promulgation thereof for distribution by the Department 
running into the summer, after the session of the Legislature is ad¬ 
journed, I thought this a case where I ought to submit my views 
and experience in the Department with regard to this particular 
subject in a preliminary report so that the Legislature might take 
action upon it, if they chose, at the present session. 

Q. For the purpose of enabling the Legislature to pass such 
measures as the circumstances would seem to warrant? A. As 
they saw fit, yes, sir. 

Q. And that would otherwise, had the old course been followed, 
of necessity have been deferred until the following year; that is, 
the Legislature would not have had the information before it until 
next session ? A. That would be the result, yes. 

Q. Had such preliminary report setting forth the views and 
experience of the Department and the necessity for legislation 
ever been prepared before from this Department? A. Hot that I 
know of. 

Q. Is there any record in the office which shows that any such 
statement as this for the benefit of the current Legislature has 
ever been prepared by any former Superintendent ? A. I do not 
know of any. 

Q. Do you know in that report how many recommendations 
you make for necessary legislation as affecting the present Insur¬ 
ance Law? A. Hot of my own knowledge, I have not verified it, 
but I am told there are thirty-four. 

Q. You wrote the report? A. I did. 

Q. The whole of it? A. Yes, sir. 

Q. With your own hand ? A. Well, it w T as typewritten from 
my dictation. 

Q. Anri at the close of every subject where you thought there, 
was any legislation needed, you recommended it ? A. Yes. 




Testimony of Mr. Kelsey. 211 

Q. And pointed out where and how it was necessary? A. As 
far as I could. The data was collected by my assistants, but the 
report was prepared by me. 

Q. Did you submit that to Governor Hughes ? A. Yes. 

Q. When ? A. Soon after I prepared it in January. 

Q. And did he make any comment upon it? A. I told him 
my reasons for printing it and asked him if he cared to glance 
over it. He said he would, and I sent him up the typewritten 
copy for his inspection. A day or two afterwards I was in the 
Executive Chamber and I asked him if he had had time to look it 
over. He said that he had looked it over, and when I inquired 
what he thought of it, he said it was a good memorandum. I also 
asked him if he had any objection to my going ahead and printing 
it, and he said, no. 

Q. And after that conversation you printed the report ? A. 
Yes. 

Q. What did you do with respect to submitting it to the mem¬ 
bers of the Legislature ? A. It was printed in this form and dis¬ 
tributed on the desks of the members. 

Q. You have not learned as yet whether the members have 
taken any notice of your proposed legislation or not ? A. I have 
not. 

Senator Hinman.— Let me suggest that there is nothing show¬ 
ing who originated the idea of submitting this preliminary 
report. 

Q. Who originated this idea, Mr. Kelsey? A. I, myself. 

Q. For the benefit of any members of the Committee who may 
not thoroughly understand your object in preparing and submit¬ 
ting this preliminary report, I will ask you to tell us again what 
was your purpose in so doing? A. The year having been what 
would be called a very interesting one in the insurance business, I 
thought it a right move to print my views of the situation — my 
experience with the new laws, and to submit such recommenda¬ 
tions as I had found in the course of the business would tend to 
improve the statutes, in the form of legislation, so that the Legis¬ 
lature could have the advantage of it before the entire report was 
printed in the summer, and thus to enable them to take such ac¬ 
tion in the matter as they might deem best. 

Q. Let me ask you, while upon that subject, with respect to 
what is the present condition of what you call the Annual Report, 
the detailed statement of the Department affairs, which ordi- 


212 


Senate Judiciary Committee. 


narily is printed in August, and which is completed by the 31st of 
December? A. Ko; the report for this year,— the fire volume, as 
we call it, which will include a preliminary report and a tabulation 
of fire insurance matters, is in the hands of the printer now, and 
will he ready for delivery in three or four days. 

Q. This will he ready next Monday? A. The printer tells 
me so. 

Q. The matter has all been delivered to him ? A. Yes, and it 
is all in type. The proof sheets have been read and the index is 
complete. 

Q. I call your attention now, Mr. Kelsey, to another subject —- 
the annual financial statements of the life companies. What are 
they? A. They are larger, more elaborate sheets in the same 
form as the fraternal, hut covering the old line life insurance 
companies. The statute — the Armstrong amendments — provides 
in detail for what the annual statement must contain. 

r 

Q. Do you recall which section of the law that is ? A. 103. 

Q. And what provision does that make ? A. What the annual 
statement of these companies shall show — their assets, liabilities, 
income, "disbursements, gain and loss exhibit and schedules of 
their real estate, and the real estate bought and sold, their mort¬ 
gage securities, stocks and bonds, the amount of salaries paid, 
the amount of property owned and unencumbered, the income 
from every conceivable form of investment, and a statement of 
dividends that have been apportioned and declared, etc., etc. 

Q. Kow, the purpose sought to he accomplished by that law 
was what? A. Publicity. 

Q. So that the insurance companies should he required to ex¬ 
hibit to the public the whole of their financial resources? A. 
Their inside business matters, yes. 

Q. That has been generally referred to as the publicity part 
of the law? A. That is what we term it. I think it is the most 
valuable part of the law. 

Q. This provision was entirely new? A. Yes. There have 
been blanks heretofore furnished, hut a great many provisions 
were added by the new law. 

Q. So that to substantially formulate a new scheme? A. It 
makes a new blank. 

Q. Kow, you were required to have this blank prepared and 
in readiness at what time? A. Por the reports of the year 1906. 

Q. And when did you begin the consideration of that subject? 
A. It was one of the first things I did after I took office. 


Testimony of Me, Kelsey. £13 

Q. W hat steps did you take with respect to it from the begin¬ 
ning, detailing, as nearly as you are able? A. What I said in 
regard to the fraternals applies to this. This was the most con¬ 
spicuous and important work. The fraternals followed this, 
rather than this the fraternals. The former blanks were made 
the basis to some extent. Mr. Appleton, as chairman of the 
committee on blanks, had charge of it for the convention. He 
had correspondence with the other members of the committee and 
talked it over with them, and went over the matter with me in 
detail, and preliminary schedules were prepared to comply with 
the provisions of the statute. He took this all to Hew York with 
him in the month of June. 

Q. Were they submitted to you before he took them to Hew 
Y ork ? A. They were from time to time, as they were in the 
process of compilation. 

Q. What did you do concerning them and the matter they 
contained ? A. I made the final determination as to what they 
should contain. 

Q. Did you examine the particular provisions ? A. They were 
gone over in detail, and the number of headings and the inquiries 
thereunder arranged so as to secure in detail the information 
wanted and to have it clearly expressed. 

Q. And that was work of a similar kind, along the same lines, 
as the standard policy, was it not? A. Very much, with respect 
to the verbiage, the number of columns, the arrangement of the 
tables, the order of succession, etc. 

Q. And the information sought to be elicited ? A. Yes. 

Q. Mr. Appleton, you say, took them to Hew York in June? 
A. I do. 

Q. They were there subject to the investigation of the commit¬ 
tee on blanks? A. The Hational Convention Committee. 

Q. Do you know how long that session lasted? A. A week, 
is my recollection. 

Q. And then what took place? A. He brought back the prod¬ 
uct of their labors, their modifications or additions, with the 
suggestions that had been made in connection with it, and the 
basis of the blank that was subsequently adopted by the Hew York 
Department, but which was not adopted by the other Departments. 

Q. Do you recall whether the committee came back with him 
to this city? A. They either came with him or they were here 
shortly after. 


214- 


Senate Judiciary Committee. 


Q. State whether or not that was the subject of examination 
during the time they were here? A. It was. 

Q. As well as the others? A. Yes. 

Q. And what did you do concerning it? A. I sat with them 
in discussing the various details — talking them over. I was 
in and out of the room where they were at work, and the schedules 
and sheets from time to time were brought into my office. They 
were back and forth through the Department for the days they 
were here. 

Q. Are you able to say to this Committee that you per¬ 
sonally examined and passed upon and discussed each subject 
which those statements contained ? A. I am, in a great many 
cases, every line. 

Q. And the information which was sought to be elicited from 
the companies ? A. Yes. 

Q. And the preparation of that statement was the result of 
your best judgment? A. It is. 

Q. Was there any consideration or talk at that time with re¬ 
spect to an effort to obtain a similarity between the questions 
in this State and other States ? A. There was. That has been 
the effort for years. The former blank was similarly constructed. 

Q. For what purpose? A. For submission to the national 
convention for their consideration as to how far a uniform blank 
could be used by, the various State Departments. 

Q. The particular practical purpose it sought to serve, what 
was that? A. For comparison in getting the same information 
for the use of the Departments in the admission and licensing 
of companies between the States, and for the data and information 
as to general averages, results of the business. 

Q. So that the blank itself would exhibit at once upon inspec¬ 
tion to State insurance circles, not only in this State but else¬ 
where, the information so far as their assets were concerned, or 
as to those subjects to which the blank was directed? A. Yes. 

Q. Do you know whether there was a sub-committee appointed, 
or, I will ask you, was this blank as finally devised by you all 
in a single sheet having application to this State alone, or having 
reference to other States as well? A. As the result of the dis¬ 
cussion and as the result of the consultation with the other 
members of the Committee it developed that a certain part of 
the information called for by the Armstrong amendments was not 
desired by other States. We therefore incorporated the informa- 


215 


i 


Testimony of Mr. Kelsey. 

tion that would be used and which was likely to be adopted by 
the convention for all the Departments into one section that We 
called part A, and we put the special information under certain 
subdivisions of section 103 into another part, called part B, which 
applies to this State only. 

Q. So that you took part in the formulation of both schedules 
A and B ? A. Yes, and in determining that there should be two, 
A and B. 

Q. And that was rendered necessary by section 103 of the 
Insurance Law ? A. Well, it was in view of the position that 
some of the other Departments took. They did not care for the 
information in Schedule B, which was required by section 103 
and was therefore necessary in this State. 

Senator Llinman.— I would like to have you bring out, Judge 
Hatch, what part of these blanks, if any, was the product of the 
Superintendent’s mind — whether it was devised by him or 
whether he passed on what was presented by someone else. 

Q. Will you state, with respect to that, what part of that you 
did yourself, what part of it you passed upon, what part of it 
others originated or passed upon ? A. It was principally passing 
upon and determining the work of the result of others which 
would be presented to me usually in three or four different forms, 
and I would decide which one seemed to me the best or most 
applicable for the purpose. 

By Senator Hinman: 

Q. Did you make any changes in any of the plans that 
were submitted to you ? A. I did, on numerous occasions, and 
in one instance I reversed the entire schedule and headings and 
the arrangement, after it had been presented and had been drawn 
up for incorporation. 

Q. Take that one instance where you reversed what had been 
done, did your action stand finally ? A. It did. 

Q. It was adopted ? A. It was. In that case I was adopting 
the suggestions, the outline that had been presented by an actuary 
that seemed to me much superior to the conditions that had been 
offered from three or four other sources. They had made up a 
composite schedule from them, and this was Mr. Wolfe, the 
actuary, who I thought had a clearer grasp of the Situation and 
showed it in the form that would be most certain and most desir¬ 
able, as I thought. 


i 



Senate Judiciary OoMMtPi^fi. 



By Mr . Hatch: 

Q. So that, as I understand you, Mr. Kelsey, whether it was 
the work or suggestions of others to you, ultimately and in the 
final determination your judgment prevailed? A. I exercised 
the authority that is vested in me to determine. I don’t know 
how many men were consulted and advised with. Just as likely a 
hundred as one. 

Q. But whatever was. presented to you, you decided what 
should be contained in the blank ? A. I did; taking advantage of 
the advice offered from all quarters as to what seemed best to do. 

Q. Who was present at this conference that you spoke about? 

A. Well, there were the members of the sub-committee, and I 
think there were a number of actuaries, at different times. 
Actuaries from the Hew York companies were here. Mr. Hunter 
of the Hew York Life, Mr. Van Cise of the Equitable, Mr. Moir 
of the Provident Savings, Mr. Euhrer of the Germania; Mr. 
Craig was here of the Metropolitan, and a great many others. 
I could not give you all the names now. 

Q. How, as I understand you, Mr. Kelsey, you regard that 
blank and the provisions of law which provides for it and this 
publicity as the most beneficial feature of the new law? A. I 
should say it was the most valuable. 

Q. I Call your attention to the gain and loss statement exhibit. 
Was that a part of this statement? A. That is an entirely new 
provision—new schedule. Yes, it is a part of the statement. 

Q. That had never had any existence prior to that time ? A. 
Hot in this State. 

Q. Had it in any other? A. Wisconsin had a short form, and 
I think Louisiana had tried it and abandoned it; I am not sure 
which State it was. 

Q. Whatever other State had used it or attempted to use it, it 
was in a meagre form? A. It was. 

Q. It was not developed ? A. It was not. 

Q. What was the purpose of the gain and loss statement? A. 
To show the actual condition of the corporation at the close of 
the business year as to gain or loss. 

Q. W ell, is that a plain simple mathematical matter that you 
can arrive at by computation ? A. It is a very involved one for 
life corporations. 

Q. Will you explain to the Committee wherein and how it is 
involved ? A. Well, it has been regarded by a great many of the 


Testimony of Mr. Kelsey. 


217 


experts as an impossibility to make an accurate gain and loss 
exhibit. The difference is in the methods of the companies in 
keeping books and fixing the amounts of premiums and the bases 
for computations make it exceedingly difficult to make a gain and 
loss exhibit that will be just as between the companies when they 
compare the exhibits separately. 

Q. What would show a correct statement of the gain and loss 
of one company would not work the same for another ? A. That 
is what I have been told by the experts. 

Q. And has your examination justified that belief ? A. I think 
it has. I have seen a statement showing the gain and losses of 
three or four of the largest and strongest companies, which in 
comparison with some of the weakest companies, would show the 
former up in a very bad light. In fact, on that basis the worst 
company made the best showing, so that if you took nothing into 
consideration but the gain and loss exhibit you would not be 
rightly informed of the relative condition of the companies, or in 
fact of the real condition of either of them. 

Q. So that this blank which you sought to develop in this state¬ 
ment was for the purpose of meeting those different conditions so 
that ultimately the Department would be in the possession of 
accurate and complete information in each instance of the true 
condition as to the gains and losses of the companies ? A. Yes, 
so that a comparison by agents would not be unjust to any com¬ 
pany. 

Q. Or misleading ? A. Misleading, deceptive. 

Q. Did you consult with anybody in connection with that — 
any expert? A. Why, a great many. I had the advantage of 
the work of all the men who had been connected with it, includ¬ 
ing the Washington Convention sub-committee, the actuaries and 
the actuarial societies, with letters and references to authorities 
and all that sort of thing. 

Q. And you availed yourself of all that information? A. I 
did. I could not have done anything without it. 

Q. Did you have any communication with Mr. Dawson with 
respect to that matter? A.' I do not recall, personally. He was 
in favor of a gain and loss exhibit, I know. He recommended it, 
and I think it was through his advice that the committee incor- . 
porated it. I think myself a gain and loss exhibit is a good thing. 

Q. You are speaking of the Armstrong Committee? A. Yes. 

Q. What I meant was did he submit to you any special recom¬ 
mendation as to how this blank should be made up ? A. I cannot 



218 


Senate Judiciary Committee. 


recall that he did, and yet, I think he sent a form incorporating 
some of his ideas of making a gain and loss exhibit, but it came 
in late and was in such form that I think it was not used. 

Q. Mr. Wolfe was who? A. An actuary; I think it is S. H. 
Wolfe. 

Q. For what company? A. I think he is a consulting actuary. 

Q. Independent? A. Yes; although he may be connected with 
a company; I don’t know. 

Q. Did you have any communication with him in regard to 
this matter? A. That I do not recall without refreshing my 
recollection. I know he has been at the Department, and I recall 
that on one occasion at least a form provided by him met the 
exigency to my satisfaction. This gain and loss exhibit is on a 
basis of Mr. Wolfe’s preparation. 

Q. Yow, with respect to the preparation of the gain and loss 
statement, did you make use of the information obtained in the 
same manner and apply your judgment to it ? A. Certainly. 

Q. As you have stated you did with respect to the other part of 
the statement? _ A. Yes, sir. I am not an expert. I am not 
familiar with the actuarial science. I Could simply take the state¬ 
ments as they brought them to me and determine which was the 
best to produce the desired results. 

Q. As a practical problem ? A. Yes. 

Q. You spoke of some States having a gain and' loss state¬ 
ment ? Do you recall about Connecticut ? A. I do not. I re¬ 
member Wisconsin. 

Q. Well now, I show you a paper (handing paper to witness). 
What is that? A. It is a page showing the gain and loss exhibit 
of the State of Wisconsin. 

Q. And that is the whole of their gain and loss statement, is it ? 
A. I so am informed and so understand. 

Q. Now where did you receive that from? A. From the Wis¬ 
consin Department. We sent for it when we were beginning the 
consideration, of the preparation of these blanks. 

Q. So that you sought every source of information of which 
you were advised that would throw any light upon this subject? 
A. I did. 

Q. And you procured that? A. I did. 

Mr. Hatch.— How, I desire to offer that in evidence. 

(Admitted and marked Exhibit 47.) 


-Testimony of Mb. Kelsey. 


219 


Mr. Mayer.— Exhibit Ho. 47 is the Gain and Loss exhibit used 
by the State of Wisconsin. 

Mr. Ainsworth.— How many questions are there ? 

Mr. Mayer.— A total of twenty-eight questions. 

Q. How, the paper which you hold in your hand (handing paper 
to witness) is what? A. It is a proposed form of gain and loss 
exhibit as prepared by Mr. Wolfe. 

Q. And does looking at that refresh your recollection that he 
submitted one? A. It does. It also refreshes my recollection 
that this is what I substituted for the preliminary plans that had 
been discussed and to some extent approved before it came in. 

Q. You had done part of the work, but when Mr. Wolfe’s sug¬ 
gestions were received they were considered so valuable that you 
adopted this ? A. Yes; that is, I thought so. 

Q. How many questions does Mr. Wolfe propose there ? A. 
There seem to be twentv-nine. 

t/ 

Q. What were the reasons, Mr. Kelsey, that induced you to make 
the change? A. The number of questions does not enter into it at 
all. There are only twenty-nine here. It was the plan of dividing 
it so as to have the gain and loss exhibit under separate questions. 
Most of the plans we had went from the beginning of it clear to 
the end and then showed the totals at the bottom of the whole 
business. Mr. Wolfe’s plan showed the totals under each item, and 
it was clearly shown how the gain or loss, as the case might be, 
in any particular column affected the grand totals. That I 
thought narrowed it down, and I think we have included a great 
many more headings, but the principle of so subdividing it and 
carrying out the gain and loss of each separate investment or 
branch of business I believe to be a good one. It showed the 
figures in a form that was logical and easy to understand, and 
which was not misleading; that was my opinion. 

Q. And you thought that if you could understand it, others 
could? A. I thought I ought to average up with the ordinary 
reader. 

Mr. Hatch.— I desire to offer that in evidence. 

(Admitted and marked Exhibit 48.) 

Mr. Mayer.— Exhibit 48 is a proposed gain and loss exhibit 
submitted to the Superintendent of Insurance by Mr. S. II. Wolfe, 
at the request of the Superintendent of Insurance. 

Q. How, I show you another paper (handing paper to witness). 
What is that ? A. It is a proposed profit and loss statement — 
as it is called by Mr. Dawson, 




220 


Senate Judiciary Committee. 


Q. When did you receive that, if you are able to tell from an 
inspection of that paper? A. I am not able to tell. It liasn t 
our stamp on it as received — oh, I see, June 20th. 

Q. Did you examine that statement in connection with the sub¬ 
ject-matter under consideration? A. I did, at the time, yes. 

Q. Did that statement appeal to you ? A. Well, at that time 
I had not knowledge enough of the varying schemes to pass an 
opinion upon it. I remember seeing it and it passed along with 
the other papers. I do not remember taking it up specially though. 

Q. Did you subsequently examine it in connection with Mr. 
Wolfe’s statement ? A. I did. 

Q. And compare the two proposed schemes ? A. A es. 

Q. And with others ? A. Yes. 

Q. And then from that comparison you made the selection as 
you have stated ? A. My recollection is that the preliminary 
steps in the gain and loss exhibit had been prepared before I saw 
Mr. Wolfe. 

Q. Yes, you have so stated ? A. Yes. 

Q. How did Mr. Dawson’s proposed statement compare with 
Mr. Wolfe’s in your opinion ? A. I think Mr. Wolfe’s is preferable. 

Q. How, in point of time, had you the benefit of Mr. Dawson’s 
scheme prior to receiving Mr. Wolfe’s? A; I cannot recall the 
date. 

Mr. Hatch.— I offer that in evidence. 

(Admitted and marked Exhibit 49.) 

Mr. Mayer.— Exhibit No. 49 is the proposed gain and loss 
statement submitted to the Department by Mr. Miles M. Dawson. 

Q. I show you another paper (handing paper to witness). 
State what that is? A. It is another proposed gain and loss 
exhibit which was prepared by Commissioner Carroll, of the 
State of Iowa. 

Q. Will you describe to the Committee what use you made of 
that ? A. It was considered with the others in the preparation 
of the financial statement. 

Q. And did any part of it enter into it ? A. I doubt if there 
did; I am not able to say. 

Mr. Hatch.— I offer that in evidence. 

(Admitted and marked Exhibit 50.) 

Mr. Mayer.— Exhibit 50 is a gain and loss exhibit proposed 
by Commissioner Carroll, of the State of Iowa, 





Testimony of Mr. Kelsey. 


m 


Q. I show you another paper (handing paper to witness). What 
is that ( A. That is another proposed gain and loss exhibit pre¬ 
pared by the Commissioner of the State of Illinois. 

Q. Do you recall his name? A. I do not now. 

Q. Does his name appear upon that? A. Oh, yes, Durfee. 

Q. And what use did you make of that? A. No, he is not the 
Commissioner, he is an ex-Commissioner. 

Q. A\ hat use did you make of that ? A. I used it in the dis¬ 
cussion and consideration of this preparation. 

Q. The same as the others ? A. The same as the others. I 
could not tell whether paragraphs or questions were incorporated 

from it now or not. We had them all before us. 

% 

Q. And you examined them all ? A. We examined them all 
and gave them due consideration. 

Mr. Hatch.— I desire to offer that in evidence. 

(Admitted and marked Exhibit 51.) 

Mr. Mayer.— Exhibit 51'is a proposed gain and loss exhibit 
suggested by ex-Commissioner Durfee, of the State of Illinois. 

Q. Were there any other gain and loss statements from any 
sources that you now recall aside from the ones to which your 
attention has been directed? A. Not that I recollect; there may 
have been, however. We had a great mass of papers. 

Q. Yes. And in addition to that — these written statements — 
you had these oral consultations of which you have spoken ? A. 
Repeatedly. 

Q. After you had consulted all of the authorities which were 
available for your consultation, in order to comply with section 
103 of the law, what did you conclude was the best form of a 
gain and loss statement blank to be prepared? A. The form 
which I have incorporated in the sheet. 

Q. And to show what subjects? A. I can more accurately 
quote than directly testify. Do you want them ? 

Q. Yes. I want the general subjects of the information which 
you sought to develop ? A. Y r ou mean just for the gain and loss 
schedule ? 

Q. Yes, for the gain and loss. A. As adopted, it covers two 
full pages. 

Q. I am not asking for- A. Oh, just the topics ? 

Q. I do not know that I make myself understood. I want to 
know, after you had examined all of these authorities, what sub¬ 
jects your questions were devoted to developing information upon 
as the central ones? A. (Reading headings from statement.) 






222 Senate Judiciaky Committee. 

Q. Well, that covers interest and mortality ? A. You mean the 
gain and loss ? 

Q. Yes — I mean the blank? A. It covers everything. (Wit¬ 
ness continues to read headings from the schedule.) (The witness 
read all of the headings from gain and loss exhibit.) 

Q. How, I show you a paper and ask you what that is (handing 
paper to witness) ? A. A gain and loss exhibit. 

Q. Which one ? A. Well, it was before the final one. This 
has 110 questions, and our final one had 125. 

Q. Well, was that the tentative statement of which you spoke ? 
A. Yes, tentative gain and loss exhibit, it is called. 

Mr. Hatch.— I desire to offer it in evidence. 

(Admitted and marked Exhibit 52.) 

Mr. Mayer.— Exhibit 52 is a tentative gain and loss exhibit 
prepared pursuant to directions of and under the supervision of 
the Superintendent of Insurance. 

Q. Is that the annual statement, Part A, of which you have 
spoken (handing paper to witness) ? A. That is the completed 
form. 

Mr. Hatch.— I offer that in evidence. 

(Admitted and marked Exhibit 53.) 

Mr. Mayer.— Exhibit 53 is the final form of Part A of the 
annual statement for Life Insurance Companies, as adopted by 
the Superintendent of Insurance under the requirements of section 
103 of the Insurance Law. 

Q. Can you tell me, Mr. Helsey, in that statement what parts 
of it are new ? A. I can, to a large extent, yes. 

Q. Well, go on ? A. The first page is new. That sets out the 
officers’ names and directors, etc. That is a sort of title sheet. 
Shall I say that this testimony is on having my memory refreshed ? 

Q. Yes. A. I should not know, except by refreshing my 
memory. On page 5 there is new matter under the statute. 

Q. What is that particular question ? I do not mean the 
form of the question there, hut I mean to develop what particular 
information? A. Well, the deferred dividends are prohibited. 
The moneys they will give as dividends are to be apportioned or 
set apart every year, annually, instead of waiting for the term of 
fifteen or twenty years, or whatever the term might he. 

Q. And that the law provided should — A. The law abolishes 
the practice or system of deferred dividends for all new policies. 
There is an additional schedule on page 8, a schedule of all other 







Testimony of* Me,. Kelsey. 


223 

deposits — well, it is new, but it is not specifically required by 
the statute. In the real estate schedule-• 

Q. W hat is the purpose of that ? A. There is a schedule that 
requires special deposits to be set out in detail. Then we added 
another schedule to include all other deposits. It contemplates a 
full account of all of their deposits and outlying funds. 

Q. \ ou got outside of the statute on that ? A. I did, a little, yes. 

Q. Go on ? A. In the real estate schedule, under the statute, 
in making over property there was a new column for the name 
of the vendor, for the actual cost of the property, for the expenses 
for repairs and improvements, the gross income, net income, 
rental value of the space occupied by the companies themselves, 
and the date — well, where they obtained consent from a Super¬ 
intendent, the date of issue of the permission to extend the time 
and the period for which it was extended. On page 10, Schedule 
A, Part II and Part III,— that is all new under the Armstrong 
amendments. That is — those are statements of real estate pur¬ 
chased and real estate sold, with a schedule for each one. In 
regard to these sheets, there are a great many instances where a 
single company — one of these large companies, will use perhaps 
a hundred extra sheets to make the lists of the property they 
hold. We have authorized them to add sheets printed in the 
same manner to bring in the full return. Page IT is a new 
schedule. That is one showing the largest balances in all banks 
with which they do business. Schedule F is new, which requires 
showing all claims resisted during the year. Schedule G is new, 
and requires a statement of all compensation and emoluments ex¬ 
ceeding $5,000. Schedule II, page 17, is new. The gain and 
loss exhibit on pages 18 and 19, is entirely new. All of the 
dividend schedules are new, which make up the rest of the book — 
that is, from pages 20 to 35. It covers all the various ages and 
the different forms of policies, etc. It is all new. 

Q. These two statements to which your attention h*a been 
directed are really pioneer statemciiTs m trie insurance worm r 
A. They are; just as the Armstrong law is—the amendments. 
It is a new idea and we have to work out the details. 

Q. You find no counterpart in any other state, save as they 
emanated from here and found expression in other statements? 
A. None whatever. 

Q. I desire to call your attention to Part B- 

Mr. Hatch.— I offer Part B in evidence now. 

(Admitted and marked Exhibit 54.) 









224 


Senate JuDiCiAitY Committee. 


Q. I desire to call your attention to Part B (handing paper 
to witness). Now what part of Schedule B is new, Mr. Kelsey? 
A. It is all new. 

Senator Page.— You mean, Part B ? 

Mr. Hatch.— Part B is what I mean, yes. 

The Witness.— Part B is that part of section 103 that was not 
adopted by the convention for all the states. 

Q. In the interpretation of section 103, was there any corre¬ 
spondence and did you make any rulings with respect to that 
section ? A. There was much correspondence and rulings were 
made. 

Q. I show you a package. What are those papers which I 
show you? (Handing package of papers to witness.) A. The 
correspondence and the rulings made in reply thereto to the pro¬ 
visions of section 103. 

Q. Who made those rulings ? A. I did. 

Q. And did you consult with anybody before you made them ? 
A. I did. 

Q. With whom ? A. My chief actuary, Mr. Paterson, and 
also with the Attorney-General. 

Q. And those matters that you felt you were able to answer 
yourself, you answered without consultation ? A. I did. 

Q. And those that you had any doubt about you consulted with 
the Attorney-General ? A. On the construction of the law, yes. 

Q. And after such information and so informing yourself, you 
made the rulings ? A. I made the rulings. 

Q. And the ruling as announced was made by you independent 
of anybody else? A. Yes. 

Mr. Hatch.— I offer this package of letters in evidence. 

(Admitted and marked Exhibit 55.) 

Mr. Mayer.— Exhibit 55 is a package of letters calling for 
rulings on section 103, and copies of such rulings. 

Mr. Hatch.— Now, we have a tabulation of what these show 
and which I will offer in evidence, and which the General will 
read. 

(Admitted and marked Exhibit 56.) 

Mr. Mayer.— I will read first just a typical letter from that 
package. This is from the National Life Insurance Company, 
of Montpelier, Vermont, addressed to the Superintendent of In¬ 
surance, and is dated September 14, 1906: 





Testimony of Mr. Kelsey. 


225 


Hon. Otto Kelsey, 

Superintendent of Insurance, Albany, N. Y. 

Hear Sir.— Kindly inform me whether the closing part of sec¬ 
tion 97 has been especially referred to the Department for a rul¬ 
ing by any company, and, if so, whai said ruling was. 

The portion of the law in question is as follows: 

‘ This section shall not apply to expenses made or incurred 
in the business of industrial insurance nor, except as to the limi¬ 
tation of expenses for the first year of insurance and as to com¬ 
pensations of and loans and advances to agents or solicitors, to 
stock corporations issuing and representing themselves as issu¬ 
ing non-participating policies exclusively.’ 

The wording seems to be entirely clear in respect to the in¬ 
dustrial company and also to the stock company issuing non¬ 
participating policies exclusively, so far as the test for expense 
of management is concerned on all business, but suppose this hi¬ 
re versed in the case of such a company as the National Life, 
which has in the past time done a great deal of non-participating 
business. If we came to New York and were admitted under 
renewal of our past licenses and represented that we were issuing 
participating business exclusively, would it not be a fair inter¬ 
pretation of this law, in applying to us the test for total expense 
of management, to permit us to divide our business for kind, 
that is to say, into participating and non-participating, and to 
treat the two divisions separately ? 

I appreciate how your time must be constantly taken up with 
all sorts of inquiries but shall regard an answer to this question, 
of large importance to our office, with much satisfaction. 

Yours very respectfully, 

JOS. A. De BOER, 

Diet, by Pres’t. President.” 

To which the Superintendent replied, under date of September 
17, 1906, as follows: 

“ Mr. Joseph A. DeBoer, President, National Life Ins . Co., 
Montpelier , Vt. 

Dear Sir.— Replying to your inquiry of the 14th inst. would 
state that subdivision 11 of section 103 of the Insurance Law 

15 



226 


Senate Judiciary Committee. 


provides that — U A foreign corporation, issuing both participate 
ing and non-participating policies, shall make a separate state¬ 
ment of profits and losses, margins and expenses, as aforesaid, 
with reference to each of said kinds of business, and also show¬ 
ing the manner in which any general outlays of the company 
have been apportioned to each of such kinds of business. 

And here is a copy of a reply which the Superintendent of 
Insurance made under date of December loth, 1900, to Mr. 
Arthur Hunter, Actuary, Hew York Life Insurance Company, 
Hew York, in response to an inquiry from that gentleman: 

•‘Mr. Arthur Hunter, Actuary, New York Life Insurance 
Company, New York City. 

Dear Sir: 

In reply to your inquiry as to the proper manner in which to 
make a return of vour collateral loans, so called under the third 
subdivision of section 103 of the Insurance Law. the collateral loan 
exhibit appearing in Part B of tlie life annual statement blanis 
at pages 2 and 3, you are advised that the Department holds that 
any collateral loan in existence at the beginning of the year 1906 
and held at the close of said year should appear in subdivision 1, 
on page 2. 

That any collateral loan made during the year 1906 and held 
at the close of the year 1906 should be returned in subdivision 2, 
page 2. 

Any collateral loan in existence at the beginning of the year 
1906 and discharged during 1906 should be returned in subdi¬ 
vision 3, page 3. 

Any collateral loan made during the year 1906 and discharged 
during the year 1906 should appear in subdivision 4, page 3. 

Following the ruling, you will note that there will be no dupli 
cation of the collateral loan returns. They will be required co 
appear but once in the schedule of collateral loans.” 

The other letters in the package relate to inquiries of every 
kind and description. 

103-1. Delating to distribution of surplus and return in annual 
statement. 

103-2. Relating to a foreign corporation issuing both partici¬ 
pating and non-participating policies. 

103—3. Relating to Schedule G of the annual statement. 

103-4. Relating to subdivision 8, of section 103. 



Testimony of Mr.. Kelsey. 


22? 


103-5. Relating to Schedule called for -under subdivision 4, of 
section 103. 

103-6. Relating to return of collateral loans. 

103-7. Relating to Schedule IT, of Part A, annual statement; 
also Schedules 3 and 5, of Part B. 

103-8. Relating to various items of the annual statement blank* 

103—9. Relating to Schedule E. annual statement blank. 

103-10. Relating to Schedule A, Part 1, of annual statement 
blank. 

103-11. Relating to subdivision 15 of section 103. 

103—12. Relating to subdivision 11 of section 103. 

103-13. Relating to the word “ written ” as used in section 
103 of the law. 

103-14. Relating to Schedule D of the annual statement. 

103-15. Relating to Schedule G, in Part A, annual statement. 

103—16. Relating to Schedule A, Part A, of the annual state¬ 
ment. 

103-17. Relating to Schedule K of Part A of the annual 
statement. 

103-18. Relating to Schedule A, Part A, of the annual state¬ 
ment. 

103-19. Relating to Schedule B of the annual statement. 

103-20. Relating to Schedule II of the annual statement. 

103—21. Relating to u Schedule of all property, etc./’ called 
for under subdivision 4, of section 103. 

103-22. Relating to “ Schedule of all property/’ etc., called 
for under subdivision 4, of section 103. 

103-23. Relating to “ Schedule of all property,” etc., in Part 
B of the annual statement blank. 

103—24. Relating to collateral loan Schedule in Part B. annual 
statement. 

103-25. Relating-to Schedule G, Part A, of the annual state¬ 
ment. 

103-26. Relating to subdivision 15, section 103. 

Q. Mr. Kelsey, the rulings which have been read and all of the 
others in that package were made by you individually? A. The) 
were, after consultation. 

Q. And you passed upon it ? A. 1 passed upon it finally. 

Q. A fraternal association is one thing and a business associa 
ti m is another? A. Yes, a fraternal association is on the lodge 


228 


Senate Judiciary Committee. 


system, and the business associations are purely business corpora¬ 
tions. The former has a social side to it. 

Q. The business associations are governed by what provision 
of the law ? A. Article VI of the Insurance Law. 

Q. That is not a part of the Armstrong law, so called ? A. No. 

Q. Is there not a specific provision in that law which gave you 
power of supervision over those companies ? A. It is not suffi¬ 
cient. They are required to report to us, and there is an as¬ 
sumption that we have control over them, but it is not very 
binding. 

Q. What did you discover concerning those business associa¬ 
tions? A. That their contracts, literature and by-laws, in nearly 
every instance, needed revision to avoid the charge of being de¬ 


ceptive and misleading. 

Q. Will you state to the Committee in what respect and describe 
how these by-laws needed revision, and their general literature — 
on that subject, what you found, giving specific instances? A. 
The contracts are frequently printed so that apparently there is a 
provision for a definite payment of $500, or $1,000, and it may be 
conditioned upon terms in the by-laws that say, if the amount is 
derived from one annual assessment or from one collection from 
all the members, leaving a loop-hole of that kind; so that a person 
pays in his money and values the contract at $1,000 or $500, and 
it turns out that they only have what an assessment will produce. 
Sometimes the policy-holder believes that he is to pay so much per 
month for so long a time, and there is found to be a provision in 
the by-laws of the contract — the policy — that authorized the 
levying of additional assessments, if there is a deficiency for an y 
purpose. Defaults are taken, forfeitures and things of that kind 
occurring frequently, where on ordinarily reading the policy a 
person not schooled as a lawyer would be misled. Sometimes they 
are apparently on the level premium plan, when as a matter of fact 
they are mere assessments conditioned on the number of members 
and the amount that will be produced by one call. There is an in¬ 
finite variety of ways in which the contracts have been drawn, 
and my information comes mostly from correspondence from those 
who claim to have been misled or defrauded by belie vine; in a con- 
tract that turns out to have no existence. 


Q. These forfeiture clauses, where is the most popular place 
that they are found in these by-laws and other literature? A. 
Well, we have found them frequently in finely printed type. Some- 


Testimony of Me, Kelsey. 


229 


times the by-laws will have a hundred pages or more, and in some 
obscure place where they will probably not be noticed and where 
the policy-holder is not apt to read or think of looking. 

Q. Now did you procure — have you procured all these by-laws 
and other literature and advertisements ? A. I don’t know that we 
have all of them. I have procured copies of the contracts, litera¬ 
ture, advertising matter, and by-laws of a great many of them, 
and I have made every effort to bring about a reformation wher¬ 
ever I found any irregularity or any apparent attempt at deceit 
or fraud. 

Q. It is a great burden even to read the mass of literature, is it 
not ? A. It certainly is. 

Q- I believe you said there was no specific provision of law 
under which you acted with respect to these associations? A. 
None that gives complete and specific control over them. The most 
that I can do is to write and to remonstrate, and to tell them that 
they must correct this thing or that thing in such and such a way 
or we shall refer the matter to the Attorney-General as a last re¬ 
sort. In a few cases they have gone that far, and then they have 
complied. We are gradually getting them straightened out. 

Q. You exercise this power under your general powers of super¬ 
vision ? A. Yes. 

Q. Did you do that of your own initiative? A. I did. 

Q. Will you tell the Committee when your attention was first 
directed to these companies and how ? A. It came from the letters 
that I began to receive when I first took possession of the office. 

Q. And was that the time when you directed all the correspond¬ 
ence of the Department to be placed before you? A. It was after 
that and in consequence of my direction that I came across so 
much of this correspondence. I assume that it would have been 
laid before me anyhow by reason of its character, but that is the 
way it actually came. 

Q. And in that way you became informed of the condition ? A. 
Yes. 

Q. IIow did you take the matter up with these companies? 
A. Originally I had a list made and took them up alphabetically. 
Then there would come in some particularly flagrant case of some 
unfortunate, and I would deviate from the rule and follow that 
one up especially until it was straightened out. 

Q. Did you have any corresnondence upon the subject? A. A 
great deal of it. 



230 


Senate Judiciary Committee. 


Q. How many are there of these ? A. These are the ones that 
have been abolished. That is, they are not abolished, but they 
cannot be organized any more. 

Q. The right of organization has been taken away ? A. Yes. 

Q. And what is the number of their membership now ? A. I 
think about a quarter of a million. 

Q. Can you tell the amount of aggregate insurance they repre¬ 
sent ? A. I would not know without refreshing my memory. 

Q. Well, approximately ? A. It is up in the millions — I don’t 
know how many. 

What would you say if I told you that the aggregate insur¬ 
ance of that character amounts to $621,500,000 ? A. That would 
correspond with my recollection of the amount I have heard stated. 
It is taken from some of the reports. 

Q. What proportion of this is carried by the companies doing 
business in Hew York? A. I don’t think I can tell that without 
referring to the figures I have had given to me. 

Q. If I tell you that nearly $200,000,000 is carried for mem¬ 
bers residing in Hew York, would that refresh your recollection? 
A. Yes. 

Q. They were all co-operative assessment companies ? A. Yes, 
what we call business assessment corporations. 

Q. (Handing paper to witness.) What are those papers which 
I have handed you ? A. Correspondence with regard to these 
business assessment corporations. 

Q. And representing how many companies? A. Twenty-four. 

Q. There are twenty-four there. Are those the twenty-four com¬ 
panies that you have been in communication with? A. They are. 

Q. And each package contains the correspondence had between 
the management and the Department ? A. Yes. 

Q. And contains a number of letters in each? A. Yes. 

Mr. Hatch.— I desire to offer these in evidence, and I would 
like to have each package marked separately. 

I he Witness.— I have a memorandum on each package of the 
result of the correspondence. 

By Mr. Mayer: 

Q. W ith regard to the package containing the papers relating 
to the New \ork Safety Reserve, in brief, what is the present 
status? A. How in the hands of the Attorney-General on the 
showing made and on the contract form. 



Testimony of Mr, Kelsey. 


231 


Q. Now, with regard to the package containing the corre¬ 
spondence and papers relating to the National Relief Assurance, 
what is the status of that matter ? A. It is pending in the office 
of the Superintendent of Insurance. 

Q. Now the package containing the American Casualty Insur¬ 
ance Company papers and correspondence, will you state the 
present status of that ? A. That has been successfully terminated; 
the contract has been reformed and the advertising literature 
changed. 

Q. Was that done under your administration ? A. Yes. 

Q. To your personal knowledge ? A. Yes. 

Q. And under your supervision A. Yes. 

Q. Now with regard to the Commercial Travelers’ Mutual 
Association, will you please tell us the status of that matter? 
A. The contract has been reformed. 

Q. That was successfully terminated ? A. Yes. 

Q. During your administration? A. All of these are in my 
administration. 

Q. Now, with regard to the package containing the corre¬ 
spondence relating to the Expressmen’s Mutual Benefit, please 
state what the condition of that matter is ? A. That contract and 
advertising literature have been reformed. 

Q. Now with regard to the package relating to the DeWitt 
Clinton Ready Relief Association of Brooklyn; what is the status 
of that ( A. The contract and bv-laws have been reformed. 

ts 

Q. In other words that has been successfully terminated during 
your administration ? A. Yes. 

t/ 

Q. And how about the package containing the papers relating 
to the Golden Eagle Association? A. That has been successfully 
terminated. They have reformed their contract and advertising 
literature. 

Q. Now, with reference to the Bankers Life Association, what 
is the fact in that case? A. The contract has been reformed as 
also the literature —- successfully terminated. 

Q. Now with respect to the package of correspondence relating 
to the Masonic Life of Buffalo, what are the facts in that case? 
A. That is pending unfinished, correspondence is still going on. 

Q. That is still the subject of consideration? A. Yes. 

Q. Is that actively on foot in the Department? A. It is. 

Q. Now with regard to the Traders & Travelers Accident Com¬ 
pany? A. That has been transmitted to the Attorney-General in 
relation to the dividend feature. 



232 


Senate Judiciary Committee. 


Q. And now, what is the status with regard to the Gold and 
Stock Life Insurance Association? A. That has been success¬ 
fully terminated — the contract and literature have been reformed. 

Q. What are the facts in regard to the American Temperance 
Life? A. That is pending; that is in the course of corre¬ 
spondence. 

Q. Now, what is the status in the case of the Knights-Templar 
and Masonic Mutual Aid? A. That has been successfully ter¬ 
minated and the contract and literature reformed. There is cor¬ 
respondence still going on with the American Temperance Life. 

Q. The American Temperance Life is still pending? A. Yes. 

Q. But the last one referred to has been disposed of ? A. Yes. 

Q. How what are the facts in the case of the Empire State 
Degree of Honor? A. That has been successfully terminated; 
the contract and literature have been reformed. 

Q. How the package relating to the Masonic Life Association 
of Oswego ? A. There the contract and by-laws were withdrawn. 
That is an association that pays benefits less than $200' or $250, 
and if they elect to do so, they are at liberty to remove themselves 
from under the supervision of the Department. 

Q. Well, you were supervising them and in correspondence with 
them? A. Yes. 

Q. But now they have availed of the law to get out of your 
supervision as Superintendent? A. Yes, they withdrew, they had 
the right to do that under the statute, where they pay to members 
less than $250. 

Q. And how about the case of the Jewelers Safety Fund? 
A. That is organized under a special act and we are unable to 
do anything with them. 

Q. Is the Department powerless in that regard ? A. It is. 

Q. Have you corresponded with them? A. I have. 

Q. And does that package contain your correspondence ? A. It 
does. 

Q. How, the Mutual Benefit Association of Suffolk county; 
Avliat is the situation there ? A. That is pending, the question of 
the contract and the literature. 

Q. And with reference to the Commercial Mutual Accident 
Company, what is the status of that matter ? A. That has been 
successfully reformed, the contract and advertising literature. 

Q. Y hat are the facts with reference to the Insurance Clerks 
Mutual Benefit ? A. That has been successfully terminated. 



Testimony of Me, Kelsey. 


233 


Q. And what about the National Accident Society; what are 
the facts in that case ? A. That is pending, and correspondence 
is still going on as to reforming the contract and advertising 
literature. 

Q. Now with regard to the Protective Life Assurance? A. 
That has been successfully terminated, the contract and adver¬ 
tising literature having been reformed. 

Q. Now, how about the Templars of Liberty of America, what 
is the status of that matter? A. That has been successfully 
terminated,— the by-laws, literature, etc., have b^en reformed. 

Q. What is the status in relation to the Order of Saturn ? 
A. Successfully terminated. 

Q. And the Knights of the Modern Maccabees — what is the 
status there? A. That has been successfully terminated. 

Q. Now, Mr. Kelsey, I hand you some correspondence with 
the American Protective Association of Brooklyn, New York, 
taken from the mass of correspondence heretofore referred to, and 
ask you whether that correspondence reached your hands, and 
whether the reply thereto annexed is one of the answers sent by 
you? A. It was received by the office November 20, 1906, and 
that is our reply, dated November 27. 

Q. Now, I also show you a letter under date of July 3rd in 
regard to the New York Safety Reserve Fund addressed to you, 
and what purports to be a copy of an answer thereto, and ask you 
whether that is a part of the correspondence and data in relation 
to the Safety Reserve Fund heretofore referred to? A. The 

t/ 

letter was received from this company on July 5th, and that is 
a copy of our reply, dated. July 17th, 1906, annexed thereto. 

Mr. Mayer.—• Now, I offer those two in evidence. 

(The packages of correspondence just referred to were admitted 
in evidence and marked respectively, in the order named, Exhibits 
Nos. 58 to 81, inclusive.) 

(Letter from American Protective Association of Brooklyn, 
dated November 19th, 1906, and Insurance Department’s reply 
thereto annexed, dated November 27th, 190j6, admitted and 
marked Exhibit 83. 

(Letter from the New York Safety Reserve Fund, dated July 
3rd, 1906, and copy of Department’s reply thereto, dated July 
17th, 1906, admitted and marked Exhibit No. 82.) 

The following is a copy of Exihibit 82: 




234 


Senate Judiciary Committee. 


“ New York Safety Reserve Fund — Gridley Block. 

Syracuse, 1ST. Y., July 3, 1906. 

IJon. Otto Kelsey, Superintendent of Insurance of the Slate of 
New York. 

Dear Sir: 

Your favor of the 29th of June has been forwarded to me here 
(dated Syracuse, New York) hence the delay in answering. We 
also deferred answering yours of the 25th in order to be able to 
send you copies of some new literature and policy contracts, a 
copy of each of which we enclose herewith. We also enclose 
notice of change of home office and designation of person upon 
whom process may be served. 

The writer expects to be in Albany within a few days and will 
bring with him a copy of the by-laws, which we cannot send to¬ 
day as we have no copies outside the minute book and our stenog¬ 
raphers are celebrating the Fourth. 

Respectfully, 

YEW YORK SAFETY RESERVE FUND, 

by Adelbert E. Gokey, 

Secretary. 

Mr. Adelbert E. Gokey, Secretary, New York Safety Reserve 
Fund, Gridley Block, Syracuse, New York. 

Dear Sir: 

' Your letter of the 3rd instant came duly to hand, inclosing five 
forms of certificate contracts in use by your association, with 
printed literature called for by this Department in order that we 
might advise the public making inquiries as to whether your 
association was strictly within the law in issuing certificate con¬ 
tracts, as letters to us led the Department to believe that such was 
not the case. 

Four of the forms of contract before me are designated as 
No. A, No. B, No. C, and No. D, for $125, $250, $375, and 
$500, respectively, endorsed “ Combination Policy ” in every in¬ 
stance. The sums indicated are for u not exceeding ” the amount 
enumerated in the several instances with coupons attached run¬ 
ning from one to four inclusive, detachable and payable five, ten, 
fifteen and twenty years after the date of the contract, in th.6 prin¬ 
cipal amount each, with a death and sick benefit future included, 


Testimony of Mr, Kelsey. * 235 

for the latter there being four receipts attached to be signed in 
the event of the contingency specified arising. 

This form of contract, in the opinion of this Department, is 
one which cannot be legally used by. your association. The New 
Fork Safety Reserve Fund is operating under the provisions 
of Article VI of the Insurance Law as a business assessment 
association and in the issuance of the kind of contract above out¬ 
lined carries on a form of endowment insurance, which was per¬ 
mitted under the statute prior to May 7, 1903, to assessment 
fraternal orders, when the Legislature of this State prohibited it, 
by the passage of chapter 450 of the Laws of that year, so that at 
tli is time there are but three fraternal orders authorized to carry 
on that plan of business, having been organized prior to the 
amendment made to Article VII of the Insurance Law regulating 
such corporations. 

When you called at this Department on the 7th instant with a 
copy of your by-laws, receipt of which is hereby acknowledged, 
your attention was called to the objectionable features of your 
certificate contracts and you stated that the right to issue the same 
was obtained from your construction of section 214, article VI of 
the Insurance Law, and you were advised that this Department 
took issue with you in your interpretation of said section, and 
this letter is sent for the purpose of formally notifying your cor¬ 
poration that the issuance of the four forms of contract must 
cease and those in existence superseded by a proper agreement. 
These four forms of contract are also objectionable inasmuch as 
there is no explicit provision incorporated therein for the calling 
of extra assessments. The provision made in the by-laws for the 
calling of extra assessments does not meet the requirements. The 
public is entitled, in dealing with a corporation, to have all the 
conditions imposed plainly and explicitly set forth in the contract 
issued. 

The fifth form of contract marked “ Benefit Certificate ” is 
defective on the ground that there is no explicit consideration 
specified and no extra assessment clause. The printed literature 
received from you, in so far as it related to the dividend feature, 
is necessarily misleading and improper and its issue should at 
once be discontinued. As to your advertising the investment 
feature of your contracts, the same is hardly warranted in view of 
your having on December 31, 1905, a balance of net assets of two 
hundred and ninety-eight dollars and thirty-nine cents ($298.39) 
as shown in your sworn report on file here. 


236 


Senate Judiciary Committee. 


The by-laws of your corporation must necessarily be amended 
following the changing of your form of contract in accordance 
with the above recommendations. When amending same you 
should have in view three essential and vital qualifications. 

1. They must be consistent with the charter or articles of asso¬ 
ciation. 

2. They must not be in conflict with any provision of statute 
or common law. 

3. They must be reasonable. 

Please acknowledge the receipt of this letter*” 

Exhibit 83 is as follows: 


Brooklyn, N. Y., November 19, 1906. 

AIr. Otto Kelsey, Supt., Insurance Department, Albany, N. Y. 

Dear Sir: —* I herewith enclose a copy of form of Certificate 
contract issued by the above Association, together with printed 
literature issued for advertising purposes and copy of by-laws in 
force at this date. 

Yours very truly, 

EDWARD NORTH, 

Secretary. 


u 


November 27, 1906. 

Mr. Edward North, Secretary, the American Protective Msso- 
ciation of Brooklyn. N. ) ., 21 Oakland Street . Brooklyn . 
N. Y. 


u 


Dear Sir: — I acknowledge the receipt of your letter dated 
ihe 191 h instant inclosing form of certificate contract issued by 
your association, copy of by-laws, printed leaflet describing plan 

ot business, table of rates and printed card used for advertising 
purposes. 

The form of certificate contract I assume is the only one in 

use by the association. It has a provision incorporated therein 
which states: 

The Association reserves the right to cancel this certificate 
at any time by returning all the payments made hereon with six 
per centum added less benefits drawn.’ 

Ibis may explain the statement made on your advertising 


Testimony of Mr. Kelsey. 


237 


card, reading: ‘ You do not have to die to win.' Associations 
operating under the provisions of Article VI of the Insurance 
Law under a riding made by the Attorney-General under date of 
August 31, 1906, may make return to certificate holders of 
dividends out of surplus accumulations, but they are not per¬ 
mitted to make any estimate of such dividends or any guarantee 
regarding same. I consider that the explicit statement that all 
payments made under a certificate contract may be returned with 
six per centum added a fiat agreement as to the amount which 
might be claimed by a member as a cash return, and that this is 
in violation of the provisions of the statute and should be imme¬ 
diately eliminated and existing contracts superseded by a proper 
agreement. 

“ In the certificate contract the're is a provision made for the 
calling of extra assessments, but there is nothing contained in the 
by-laws which regulates this matter. Your by-laws should be 
properly amended. 

"I wish to quote from the printed leaflet as follows: ‘ This 
Association has been examined by the Insurance Department of 
the State of Xew York. The report of the examination shows 
lhat this Association has paid thousands of dollars to relieve the 


sick; and to satisfy the wants of those left destitute by the death 
of parents or relatives. The examiners inform us that the condi¬ 
tion of the Association is sound, its claims all paid, and that its 
accounts are being kept in a very satisfactory manner, and fur¬ 
thermore, that the working of the Association, in all its details, 
will compare favorably with that of any other company in the 
country.’ 

“ The last examination of this Department of the condition and 
affairs of your association was under date of January 28, 1898, 
in which it was shown that your assets consisted of $5.57, lia¬ 
bilities $7.10. Ko reference was made to the payment of ‘thou¬ 
sands of dollars to relieve the sick, etc.,’ as you claim in your 
advertising leaflet. It is set forth in the report of the examiners 
that at no time subsequent to the enactment of the present In¬ 
surance Law had your association been in possession of the re¬ 
quired reserve or emergency fund and that your collections were 
insufficient to properly take care of your liability for claims and 
running expenses, and further stating ‘ its business as now con¬ 
ducted would seem to be of no benefit to the insuring public,’ 

“ This particular advertisement is a clear manifestation of the 


238 


Senate Judiciary Committee. 


purpose of your officers to deliberately misrepresent the facts in 
the premises and as well to mislead the insuring public as to the 
exact status of affairs, and might properly he claimed as one 
promulgated with the desire to defraud. 

“ On the last page of the advertising leaflet appears the follow¬ 
ing: ‘ The American Protective Association has paid to its mem¬ 
bers over $26,000.00/ 


DEPOSITORY OF FUNDS. 


Seventeenth Ward Bank, Capital. $100,000 00 

Greenpoint Savings Bank, Surplus. 584,644 94 


“ The manner in which this matter is set up is a further in¬ 
dication of your intention to mislead, as the casual observer would 
naturallv infer that your association had the amount of funds 
which belongs to the two banking institutions, for in the first in¬ 
stance you state the capital of the bank, and in the second show 
the bank’s surplus, thereby giving the impression that the two 
items might belong to the American Protective Association, other¬ 
wise you would not differentiate between the manner of setting 
forth the resources of the two banks of deposit. It is not neces¬ 
sary for anv insurance corporation to advertise the resources of 
the institutions with which it deposits its funds, and is particu¬ 
larly unnecessary where the amount of funds in possession of the 
corporation is such a small item as appears from an examination 
of the last statement you rendered to this Department. 

“ On receipt of this communication you will be good enough to 
acknowledge the same, advising that you will immediately discon¬ 
tinue the issuance of the advertising leaflet which we have criti¬ 
cised and take steps to otherwise comply with the terms of this 
letter.” 


By Mr. Hatch: 

Q. Do you know, Mr. Kelsey, the character of the people with 
respect to financial ability with which these business associations 
deal ? A. They are the poorer class of people. 

Q. And it represents that branch of supervision which is made 
necessary for people of very moderate means ? A. Yes, straitened 
circumstances. 

Q. Under the law is there a provision of the law that you can 
refer these matters to the Attorney-General ? A. There is. 





Testimony of Mr. Kelsey. 


239 


Q. And that is the only power yon have is- it not? A. It is. 

Q. So that - A. And the proceedings are very dilatory 

there. There is tio summary way of reaching a result. 

Q. Your method in connection with these insurance companies 
has been by these letters of the character which have been read, to 
force them to some observation of decent requirements ? A. Yes, 
sir. 

Q. And, as a last resort, you send them to the Attorney-Gen¬ 
eral ? A. Yes. 

Q. Can you tell out of this number how many you have been 
required to send to the Attorney-General that you were not able 
to deal with yourself ? A. There are only two or three, I think. 

Q. And the others you have managed to correct ? A. Yes, by 
working with a great deal of patience and through continued cor¬ 
respondence. 

Q. How, I show you page 28 of Exhibit 46, which is your Pre¬ 
liminary Report that you made mention of. Do you call the at¬ 
tention of the Legislature there to this condition ? A. I do. 

Q. And make a recommendation concerning it ? A. I do. 

Q. And to what extent do you discuss that? How many pages 
are there? A. It starts about the middle of page 28 and finishes 
about the middle of page 33. 

Q. That recites the history and the-A. It gives my ex¬ 

perience in dealing with them. 

Q. And the law applicable thereto ? A. Yes. 

Mr. Hatch.— I desire to read to the committee the closing por¬ 
tion of this report and the recommendation. That is, after the 
recital of the law which governs the various things that he has 
found with respect to the financial ability to pay and the manner 
and method in which abuses have arisen, he states: “ The above 
will indicate that some protection might be afforded the insuring 
public if the statute should require that every certificate contract 
hereafter written by associations of this character have printed in 
large type across the face the words 6 assessment association ’ after 
its corporate title. 

“ The question might be asked, why has there not heretofore 
been adopted a strictly formulated plan to regulate the contracts, 
by-laws and advertising matter of this class of corporations? There 
is nothing in the statute authorizing such action by the Superin- 
intendent of Insurance and the absence of clearly defined power 
and the failure of recommendations made by former superintend- 





240 


Senate Judiciary Committee. 




ents for amendments to this article which would have permitted a 
closer supervision, have rendered futile every attempt to hold this 
class of corporations to the spirit and purpose of the law. The 
Insurance Department is accomplishing partial success along these 
lines under implied powers of the statutes granting supervision 
and regulation of all insurance corporations and associations. 
Legislative attention to the correction of persistent evils above 


indicated will protect large classes of uninformed honest citizens 
from financial loss, and the humiliation of feeling that they have 
been swindled under sanction of law.” 


Q. I believe you stated, Mr. Kelsey, that you took the initiative 
in looking after these companies? A. I did. 

Q. I call your attention now to the filing of lists of policy- 
holders with your company. Will you state to the committee 
what the provision of the law is with respect to that subject ? 
A. The statute requires that each life insurance company that wiU 
vote for directors shall file duplicate copies of a list of its policy¬ 
holders— of all its policy-holders — at its home office and-with 
the Superintendent of Insurance, as well as with the general 
agencies in the various States and in foreign countries. 

Q. That is how many lists to be filed? A. Lists for each sep¬ 
arate company. 

Q. LIow long prior to the election must that be done? A. Five 
months. 

Q. What provision is there in the law with respect to inspec¬ 
tion and copying of those lists? A. The law gives the right dur¬ 
ing business hours to have the lists inspected by any policy-holder 
so desiring. 

Q. And that for a period of five months prior to the election ? 
A. Until the completion of the nomination of tickets, I think. 

Q. What was the condition immediately following the adjourn¬ 
ment of the Legislature with respect to this matter? A. It was 
immediately taken up. Owing to the magnitude of the lists in 
the three larger companies — the two larger, where there was 
evidently to be contests, it was desired to arrange the settlement 
of the rules under which they should be completed and filed, so 
that they would have time to get them printed; they had to be 
filed by the 18th of July. 

Q. Were any questions raised with respect to the filing of 
these lists? A. There were. 

Q. Can you tell what they were? A. As to the alphabetizing 



241 


Testimony of Mr, Kelsey. 


arranging them in alphabetical order in the form in which they 
should be printed, and the rights of the people to inspect and 
make copies of them. 

Q. Who raised the question ? A. The counsel for the life in¬ 
surance companies first. 

Q. And when that question was raised, did you consult with any 
one ? A. The Attorney-General. 

Q. And how frequently did you consult with the Attorney- 
General upon that subject? A. I could not say, upon that sub¬ 
ject; it was from day to day until it was disposed of. 

Q. Well, covering about what period of time, Mr. Kelsey ? A. 
In regard to the preparation of the lists it was probably three or 
four weeks. It would not be every day, but it would be from time 
to time. 


Q. Did any question present itself with respect to the filing of 
the lists in the offices of general agents — that no general agency 
was there ? A. Yes. The statute says “ General Agency.” I 
think the Kew York Life have nothing which they call a General 
Agency. The other companies had several general agencies in 
one city like Chicago, and other general agencies would comprise 
counties, sections of a State, or adjoining sections of two States, 
and it had to be determined how the Department construed the 
statute in order to have the lists not only available for inspection, 
but for the convenience and accuracy in receiving ballots and 
keeping them subsequently. I made the ruling that a general 
agency — that the term “ General Agency ” would apply to the 
boundary lines of the several States; that if there was no general 
agency, in each case each company should provide one as a place 
for and in which these lists could be kept in each State and in each 
foreign country. 

Q. Did you find any such trouble to exist in any foreign coun¬ 
try ? A. Trouble? 

Q. Where there was no general agency ? A. Oh, yes. A great 
many of them have made a designation and filed them under my 
ruling. 

Q. Was that the subject of considerable controversy and com¬ 


ment? A. It was. 

Q. And conference? A. Yes. 

Q. Can you state to the Committee whom you conferred with 
besides the Attorney-General? A. Well, the counsel for the re¬ 
spective companies were here. 


16 


i 



242 


Senate Judiciary Committee. 

Q. Do you recollect who they were ? A. I think Mr. McIntosh, 
and Mr. McKeen, and I don’t know — but some representative of 
the Equitable; and the Security Mutual — I think his name is 
Mr. Jenkins. 

Q. Did you have a meeting with those counsel before the At¬ 
torney-General ? A. I do not recall that. 

Q. But you consulted with the Attorney-General? A. Yes, 
I did. 

Q. Did you have any consultation in respect to that with what 
was known as the Policy-Holder’s Committee ? A. Yes. 

Q. Who were they ? A. It was an organization of policy¬ 
holders in both the Mutual and the Yew York Life, of which 
Judge Parker, A. B. Parker, was chairman, and Bichard Olney 
was chairman of the Executive Committee, I think. 

Q. Mr. Bicliard Olney was president, and Judge Parker was 
chairman of the Committee, isn’t that it? A. I think Judge 
Parker was a head of it, and Bichard B. Olney was the head of 
the proxy holders. TTntermeyer & Marshall were the counsel 
and Mr. Scrugham was manager. 

Q. They entered upon a pretty lively campaign for the purpose 
of seeing if they could not capture the Boards of Directors of 
those two companies ? A. They did. 

Q. In what way was Mr. Scrugham connected with this com¬ 
mittee ? A. I think he was the manager. 

Q. And they raised questions concerning this provision of the 
law ? A. I do not recall distinctly now. 

Q. Did you procure an opinion of the Attorney-General about 
that subject ? A. I do not seem to have an individual recollec¬ 
tion; I think possibly I did. 

Q. What book is that? (Handing book to witness). A. It is 
a book of decisions and rulings. 

Q. By whom ? A. By me. 

Q. And it contains decisions by the Attorney-General also 
does it' not ? A. Yes, it includes the rulings made upon that 
section. 

Q. Where did that opinion that appears at page 2 of that book 
come from ? A. That is something I wrote myself. 

Q. Was that after you had consulted with the Attorney-Gen¬ 
eral ? A. Yes, I remember distinctly consulting with him. 

Q. And that is the ruling ? A. Yes, that is my own draft of the 
ruling. 





Testimony of Mr. Kelsey. 


243 


By Mr. Mayer: 

Q. Do you remember the date ? A. I do not. 

Q. Would this show the date? A. It ought to, but I don’t see 
that it does; it was early in June. 

Q. Do you recall that Mr. McIntosh, of the Yew York Life, 
had a conference with yourself and with the then Attorney-Gen¬ 
eral ? A. In relation to the district. 

Q. In relation to the question of districts ? A. At your office. 
Q. Yes. A. I do. 

Q. And do you remember that on that occasion he had a very 
elaborate list of the different places in this country and in foreign 
countries ? A. Yes, that is true. 

Q. Kow, have you any recollection in that respect of going 
over place by place what he had on his list, in order to ascertain 
how to treat with it under the law ? A. Yes. 

Q. And do you recall how long that conference was ? A. It 
would seem to me an hour, or such a matter. 

Q. Fully that? A. All of that. 

Mr. Mayer.— Kow, I will read in evidence the copy of the 
ruling testified to by the superintendent and appearing at page 
2 of a book kept in the office of the superintendent called, 
<e Opinions of the Attorney-General and Department rulings under 
amended Insurance Law, Ko. 1.” 

(The same was then read by Mr. Mayer.) 

Mr. Mayer.— I offer in evidence the rulings of the superintend¬ 
ent which I have just read, in the matter of maintaining lists of 
names of policy-holders at General Agencies, which ruling is 
found on page 2 of a book kept in the office of the Superintend¬ 
ent of Insurance, known as book 1STo. 1 of the opinions of the 
Attorney-General and Department rulings under the amended 
Insurance Law. 

(Marked Exhibit 84.) 

By Mr. Mayer: 

Q. Do you recall a question arising about who were entitled to 
inspect and copy the lists of policy-holders? A. F do. 

Q. In what manner did that come up ? A. The first suggestion 
to me, I think, came in the form of a request through the mail - 
an inquiry as to the lists and when they would be ready for 

copying. 



244 


Senate Judiciary Committee. 

Q. What further occurred ? A. The request came not from a 
policy-holder. It suggested to me the possibility of applications 
for inspecting the lists from those who desired to make extracts 
or copy them for commercial purposes. That led to a considera¬ 
tion of what the limitation should be for permitting an inspection 
of the lists, and on that I formulated a rule that provided under 
•what circumstances and by what authority representatives of 
policy-holders might have access to the lists and make copies of 
them. 

Q. Was there any considerable controversy over that matter ? 
A. There was. 

Q. Who raised the question; who argued it and who presented 
it to you ? A. I don’t know that it went through the form of a 
hearing or argument. The International Committee objected in 
the first place on a supposition that they might be barred, and 
I think that was explained satisfactorily so that it removed their 
opposition. 

Q. Was it the subject of correspondence? A. I cannot recol¬ 
lect now. I think there was — I know there was, because we 
corresponded in relation to the form of an acknowledgment by a 
notary public and the framing of the certificate or whatever should 
be given to the person appearing. 

Q. Did you write the letters ? A. I did. 

Q. Do you recall having any conversation with Mr. Unter- 
meyer? A. With Mr. Scrugham, I think, in relation to the lists. 

Q. Personally or over the phone, or how? A. Personally. 
The first I saw of Mr. Scrugham he came in about the time the 
lists were being prepared or filed. lie was introduced to me 
and he discussed the general situation and the method of making 
copies. 

Q. As I understand, what you proposed to do was to permit 
policy-holders and all those entitled to examine or copy the lists 
to do so, but to protect them from any improper use? A. That 
is all. 

Q. That is what you mean by commercial purposes, and that 
is what you wanted to do ? A. Yes. So that one company could 
not work on the policy-holders of another company. 

Q. Did you make a written ruling on that subject ? A. I did. 

Mr. Mayer.— I show you page 4 of book 1 heretofore referred 
to, and ask you if that is the ruling that you made as just ques¬ 
tioned by counsel? A. Yes. 



Testimony of Mr. Kelsey. 245 

Mr. Hatch.— I offer it in evidence. 

(Admitted and marked Exhibit No. 85.) 

Mr. Mayer.— Head Exhibit No. 85. 

The Witness.— “The lists of policy-holders on file shall be 
subject ’to inspection and copy at any time during business hours 
by any policy-holder, or by his authorized representative. The 
policy-holder appearing in person must present his policy and-his 
last receipt for premiums paid. A policy-holder designating a 
representative to inspect or copy from any of the lists on file in 
the Department will be privileged to appear by only one repre¬ 
sentative at a time. The representative of a policy-holder must 
produce a written designation conferring authority in each in¬ 
stance, stating the name of the company insured in, the number 
of the policy and name of the appointee, and the designation 
must be duly signed by such policy-holder and acknowledged 
by him before a notary public.” 

Q. At that time with respect to this matter, as well as others, 
the public press teemed with articles, did it not ? A. It was very 
active in discussing everything touching the insurance situation. 

Q. It was crimination and recrimination ? A. There was. 

Q. That was continued daily, was it not? A. Practically every 
paper that came out. 

Q. I think you spoke with respect to your final determination 
with respect to the general agencies where there existed no general 
agency or where there existed more than one general agency in a 
particular district? A. Yes. 

Q. Now, did you make that the subject of a written ruling? 
A. lie has alreadv read it, I think. 

Mr. Mayer.— Yes, that was a repetition. 

Q. Did you have any correspondence with the president of the 
Security Mutual, Mr. Turner? A. We did. 

Q. And upon this subject, Mr. Kelsey? A. Yes. 

Q. Did you make a written ruling in that case? A. I think 
so. I can tell by looking at it. 

Q. Let us see, that is page 31, volume 1? 

Mr. Mayer.— The ruling was at page 26, and then there was 
further correspondence at page 31. 

(Book handed to witness.) 

The Witness.— Yes, in relation to the filing of policy-holders’ 
lists. That repeats practically the ruling as to the general 
agencies in districts, in the first decision. 







246 


Senate Judiciary Committee. 


To which attention has been already called? A. Les. 

Q. What was the occasion or necessity for more than one 
ruling on that subject? A. I don’t think there was. I think that 
is a copy of the same one sent to him, advising them of what the 
ruling was that had already been made. Then later when others 
asked for what the construction of the statute was by the Depart¬ 
ment, we forwarded the same opinion. 

Q. So there was really but one ruling? A. That is all. 

Q. Now the New York Life filed how many volumes of names ? 
A. 344. 

Q. And the Mutual Life how many? A. The Mutual filed in 
different form. There were about twenty volumes, two complete 
sets larger than a ledger account book. The New York Life has 
the largest number of policy-holders in any event. 

By the Chairman: 

Q. How many names were there in a volume of the New 
York Life ? 

By Mr. Hatch: 

Q. Can you state ? A. I could not. There were supposed to 
be about 800,000 policy-holders. 

By Mr. Ainsworth: 

^ . i 

Q. In the 172 volumes? A. Yes. 

By Mr. Hatch: 

Q. Now, the Equitable Life, 268 volumes, two complete sets. 
Does that correspond with your recollection ? A. Yes. 

Q. The Germania Life, Home Department, two volumes; for¬ 
eign,- two volumes? A. Yes. 

Q. The Mutual Reserve, two volumes? A. That was small too. 

Q. The Security Mutual, two volumes; The Home Life the 
same, and the Manhattan Life —? A. Small. 

Mr. Mayer.— I have figured it out Senator Davis. It averages 
about 4,600 per volume in the New York Life. 

Q. Y hat was done with those volumes ? A. I made an arrange¬ 
ment with the Superintendent of Public Buildings to have a 
special room, or rather, three rooms in succession. The first one 
was fitted up with shelves to hold the books, and extra locks 
were put on of the ^ ale lock pattern — a complicated key. 


Testimony of Mr. Kelsey. 


247 


Q. In the Capitol Building? A. In the Capitol Building. I 
detailed — I put the whole matter in charge of a subordinate. 
I don’t remember whether it was Mr. Paterson or Mr. Appleton 
had charge of the key. 

Q. AVliat was done with it during the day? A. It was held 
ready for inspection during business hours. We only went up 
when somebody came to the Department and requested permis¬ 
sion to inspect them. It was one of the committee rooms, or 
three of them, on the other side of the Capitol. During the 
time we had about ten men detailed from the Department. 

Q. Who did the copying? A. The International Committee 
employed about 1G0 or 170 people from some agency. They 
started in on the Mutual Life. 

Q. And you had supervision of the lists at that time? A. 
Entirely. 

Q. Were there any lists filed of names after these volumes 
were filed? A. The Mutual Life — the International Committee 
brought some proceedings to require the Mutual Life to correct 
their lists claiming there were a great many errors. The result 
was an order from the court directing the Mutual Company to 
furnish weekly a corrected list of changes during the week and 
subsequently until the expiration of the period they sent up 
every week, and they were duly entered on the original book — 
a memorandum of it, and the new books filed. 

Q. That continued from August 20 to October 22nd ? A. Yes. 

Q. Weekly? A. Yes, until they got ready to vote. 

Q. You discovered that the work was one of very great mag¬ 
nitude, did you ? A. I did. 

Q. And did you take the matter up with insurance companies 
or with the Yew York Life Company ? A. The work here in 
keeping the Mutual list developed to such an extent that I felt we 
ought to take measures to have the list furnished without having 
the copying done here. I wrote to President Orr of the Yew 
York Life requesting him to consider favorably the furnishing to 
the International Committee of copies of their lists of names 
from their stencils prepared in Yew T York City. I had some tele¬ 
phonic communication, I remember they got me Judge Parker — 
and it was referred back to Mr. Olney; no, I got Mr. Olney 
first, and he referred me to Judge Parker, and subsequently to 
Mr. LTntermyer and an arrangement was agreed to whereby the 
Yew York Life did arrange to furnish the names without the 
copying to be done here. 




** I . ' , , , 

248 Senate Judiciary Committee. 

Q. During that period did you have any conference with 
policy-holders and committees and officers of companies? A. It 
was running all through the summer while the election was 
pending. 

Q. And that was continuous ? A. It was continuous. 

Q. How, I show you a bundle and ask you what that is (hand¬ 
ing bundle of papers to witness) ? A. It is a package of cor¬ 
respondence— letters from the Hew York Life and the policy- 
holders’ committee —• well, it seems to be mostly from the com¬ 
pany — all of them from the company in fact. 

Mr. Ainsworth.— Yes, they are all from the company. 

Q. About what — to what subject does that correspondence 
relate? A. They are replies to letters that I had written calling 
attention to complaints made to me by the International Commit¬ 
tee as to the action of the company or its representatives in the 
conduct of the campaign. 

Q. Who did that complaint come from? A. Apparently from 
the International Committee. Either from Untermeyer, Mar¬ 
shall or Scrugham. 

Q. They were the active managers of that canvass ? A. Of 
the campaign, yes. 

Q. And they made complaints of what character against the 
company ? A. They charged violation of the law and unfairness; 
the expenditure of the company’s funds and the using of the 
company’s property and the employing of its agents, and unfair 
methods about printing the tickets and the literature that was 
sent out — very much like a political campaign. 

Q. And then you called the attention of the companies to the 
conduct and acts charged against them ? A. To every complaint 
where specific names of persons or methods were furnished I 
called upon- the companies for an explanation. 

Q. Did you write theseDetters yourself? A. All of them. 

Q. Do you know how many there are here, or the extent of 
them ? A. I think it is 540. 

Mr. Ainsworth.— 540, yes. 

Q. Yhat did you do when you received the company’s answer 
to these complaints? A. Transmitted it to the International 
Committee. 

Q. W ei e there any occasions on which you had to make any 
rulings in connection with their conduct ? A. I do not recall 
distinctly. I must have made rulings. 





/ 


Testimony oe Mr. Kelsey. 


249 


Q. Did you find that the charges made by the gentlemen on the 
outside who wanted to get in were very much like the charges made 
by politicians in the same situation ? A. They were, to some 
extent; and a great many times, I think, they were made upon 
misinformation or misapprehension, and some of the things com¬ 
plained of were things that the Department could in no way 
remedy. Directions as to how the canvass should be conducted 
were written repeatedly to the companies in the early part of the 
canvass, as to their having no right to employ their agents as can¬ 
vassing or campaign representatives in the controversy or to use the 
money or property of the company for that purpose. They denied, 
all of them, that a dollar was used, or any stationery or any time 
of their agents employed. 

Q. Those matters to which you called their attention, which 
they were prohibited from engaging in, were matters regulated 
by statute ? A. Yes. 

Mr. Hatch.— I desire to offer that package of letters in evidence. 

(Admitted and marked Exhibit 86.) 

Mr. Mayer.— I now offer in evidence a synopsis of the corre¬ 
spondence in evidence as Exhibit 86. 

(Admitted and marked Exhibit 87.) 

Mr. Mayer.— I will just read the outline of this correspond¬ 
ence. It was practically almost daily. 

The Witness.— It was actually daily. There never was a day 
we did not get it. 

By Mr. Mayer: 

Q. In addition to the letters you have just looked at, Exhibit 
86, was there a good deal more corespondence ? A. Yes, there 
was an immense volume from all quarters of the State and country, 
in addition to the specific letters from this association. 

Q. Then do I understand that Exhibit 86 is a package contain¬ 
ing letters of complaint ? A. Ho, it contains the replies from the 
Yew York Life in response to complaints I had submitted to them. 

Q. It relates to the Yew York Life only? A. To the Yew 
York Life only. 

Q. So that synopsis 87, which I am about to read, is merely a 
synopsis of this correspondence by you with the Yew York Life in 
reference to the complaints made to you by the International 
Policy-holders’ Committee? A. Yes. 

Mr. Mayer.— I will now read the synopsis, Exhibit 87 
(reading) : 






250 


Senate Judiciary Committee. 


94-A-l. In relation to the complaint of Mr. Samuel Unter- 
mycr for alleged illegal expenditures of money. 

94-A-2. Relating to complaint of Mr. ITntermyer in reference 
to the printing and circulation of a circular. 

94-A-3. Relating to the agency bulletin published by the New 
York Life Insurance Company. 

94-A-4. Relating to complaint by Mr. Untennyer in reference 
to a form of petition by policy-holders. 

94-A-5. Relating to a complaint of Mr. Scrugham in reference 
to an agent in Jacksonville, Florida. 

94-A-6. Relating to the Governor Jennings matter. 

94-A-7. Further reference to the Governor Jennings matter. 

94-A—8. Relating to the complaint of Mr. Scrugham as to the 
action of Mr. Angus M. Almon. 

94-A-9. Relating to the Governor Jennings matter. . 

94-A-l 0. Relating to the matter of E. P. Cole. 

94-A-l 1. Complaint of company relating to mailing of ballots 
by International Policy-holders’ Committee. 

94-A-l 2. Relating to the complaint of Mr. Scrugham in the 
matter of the action of J. J. Parker, Cleveland, Ohio. 

Q. Who was J. J. Parker, of Cleveland, Ohio? A. The prob¬ 
ability is he was an agent of the company out there. 

Mr. Mayer.—(Continuing reading) : 

94-A—13. Relating to complaint of Mr. Scrugham in regard 
to mailing “ official statement.” 

94-A—14. Relating to complaint of Mr. Scrugham in regard to 
non-mailing of “ official statement.” 

94-A-l5. Relating to the matter of A. W. Pollard, Houston, 
Texas. 

94-A—16. Relating to complaint of Mr. Scrugham which 
charges the company with an attempt to stuff the ballot box. 

94-A-l 7. Relating to certain persons who had not received 
“ official statements.” 

94-A—18. Relating to certain persons who had not received 
“ official statements.” 

94-A-l 9. Relating to complaint of Samuel Untennyer in the 
matter of Me Clave. 

94-A-20. Relating to matter of G. B. Smith, Philadelphia. 

94-A-21. Relating to matter of C. A. Yeomans, of Clagary, 
Canada. 

94-A-22. In relation to method of transmitting the daily mail 
from general postoffice to the home office of the company. 





Testimony of Mr. Kelsey. 


251 


94-A 23. Kelating to request of Samuel Untermyer for copies 
of newer lists of policy-holders. 

04-A—24. Relating to complaint of Samuel Untermyer in 
reference to advances to agents for electioneering purposes. 

94-A—2o. Relating to renewed request of Mr. Untermyer for 
copies of newer lists of policy-holders. 

l>4-A-2(). Relating to the request of Samuel Untermyer for 
newer lists of policy-holders. 

94-A—27. Relating to complaint of Honorable Joseph T. John¬ 
son, Spartanburg, South Carolina. 

94-A-28. Relating to complaint of Mr. George R. Scrugham 
in the matter of Rafferty. 

94-A-29. Relating to complaint of Mr. James P. Woodward, 
Washington, D. C. 

94-A-30. Relating to complaint of Mr. John McIntyre of Hew 
York city. 

94-A-31. Relating to complaint of Mr. George R. Scrugham 
in relation to certain alleged violations of law by agents and 
officers of the company. 

By Mr . Hatch: 

Q. This correspondence to which attention has been directed 
relates only to one company ? A. One company. 

Q. And with respect to the others was it — A. Equally vol¬ 
uminous. 

Q. And at this time, Mr. Kelsey, in insurance circles the pub¬ 
lic mind was considerably agitated, was it not? A. Very much so. 

Q. State whether or not in your judgment each one of these 
questions which were brought up especially with respect to the 
charges and taken in connection with the Armstrong investiga¬ 
tion, presented vital questions which required your careful con¬ 
sideration ? A. They did. I was keeping the peace all the time 
between the two factions — between the two parties. 

Q. So as to get the final expression of the policy-holders ? 
A. To make it just as fair as I could; to keep each one within the 
limits and give the policy-holders a fair chance. 

Q. And in order to accomplish that purpose you gave your 
special personal attention to it? A. I did. 

Q. Without intrusting it to others? A. Ko one else, I think, 
handled any letters in regard to the election. It got started that 
way and I kept it all in my hands, 




252 


Senate Judiciary Committee. 


Q. Do you recall what the provisions of section 94 of the 
Insurance Law refer to ? A. They regulate the entire election 
of directors, from the very beginning — the entire proceeding. 

Q. Did the statute formulate any ballot ? A. It did not. 

Q. It gave the direction that the ballot should be prepared, 
but it made no attempt to describe what its terms should be ? A. 
Not the form of it, but it indicated what it should include. 

Q. But the form was not provided? A. No. 

Q. Now, will you state to the Committee what you did in that 
connection ? A. We prepared what was called the official state¬ 
ment that the companies were to forward to each of their policy¬ 
holders with return envelopes and the proxy form, and which, 
when executed became a ballot. 

Q. Did you consult with any person with respect to the method 
in which the ballot should be presented ? A. A great many times 
with a great many people. 

Q. State whom ? A. The representatives of the different policy- 
holders’ organizations, the counsel and officers of the two com¬ 
panies. Well, the form of the ballot was also taken up with the 
Equitable people and the Security Mutual, and I think others; yes, 
and the Mutual Reserve people also. 

Q. Was the Attorney-General called into the conference or did 
you consult him at any time ? A. A great many times. 

Q. Upon the legal questions that arose in connection with the 
formulation of that ballot ? A. Not only the legal questions, but 
also the practical side, he being familiar with elections, and the 
preparation of ballots and the conduct of elections. I used him 
in various capacities. 

Q. Let me ask you if upon the preparation of the ballot you 
consulted with Senator Armstrong? A. I did. 

Q. Where? A. Here at Albany, and, I think, by corre¬ 
spondence. I don’t think I ever did any more than to impose upon 
him by asking his opinion and sending him copies of the forms. % 
He was not employed as counsel, however. 

Q. You continually sought the Senator for information, did 
you ? A. Certainly. He was the Chairman of the Committee and 
he knew precisely what they were driving at; and I remember on 
one occasion telling him the possibilities of trouble in that con¬ 
nection, and he told me it was his baby — he drew it himself; 
and I afterwards went to him repeatedly. 

Q, You did that in order that you might be certain to fulfill 



253 


Testimony of Me, Kelsey. 

the law ? A. Y es, I wanted to have the opinion of those who 
were qualified to speak as to what the Committee intended wher¬ 
ever there was any opportunity for doubt as to the construction. 

Q. I call your attention, Mr. Kelsey: are you able to state 
from memory the number of specific questions which arose and 
which were considered, involving many consultations ? A. In 
regard to the ballot ? 

Q. Yes, in regard to the ballot? A. Only in a general way. 

Q. I have noted them here and I will Call them to your atten¬ 
tion and then you may state ? A. Very well. 

Q. Was the question raised as to how the ballots should be 
printed when the policy-holder was not an English speaking 
person? A. Yes. 

Q. State in detail with respect to that ? A. That was pre¬ 
sented by the counsel to the Kew York Life Company. Mr. Mc¬ 
Intosh came up and had a conference with me, and, I think, with 
the Attorney-General; and Judge McKeen of the Mutual followed 
the ruling. There were a great many languages — I don’t know 
how many — that the large companies would have to provide for. 
The statute provided simply for the printing of the ballot in the 
English tongue, presumptively. 

Q. That is, you construed it that way? A. That was my 
construction, yes. I told Mr. McIntosh that I could not be re¬ 
sponsible and would not assume the responsibility for a correct 
translation, but that I would authorize, so far as the form was 
concerned, the printing in duplicate on each official statement of 
the instructions and the caption and the various directions, giving 
one paragraph in the English language, and following it with the 
foreign language of the policy-holder who was to use it. So that 
they printed the ballots in that form and sent them up to me, 
and I approved them and filed them. 

Q. Do you know how many different languages the ballots 
were printed in? A. I have forgotten at the moment; I did 
know. 

Q. Kineteen? A. As many as that, yes. 

Q. Well, was that particular question the subject of a great 
deal of controversy and consultation ? A. Well, the controversy 
was not so much over that question of printing in the different 
languages; it was more with regard to the details of the ballot. 
There was not a line or form from top to bottom that was not 
disputed or quarreled over to some extent before it was settled. 



254 


Senate Judiciary Committee. 


Q. Do you recall that there was a controversy that arose on 
the order in which the various tickets should ajipear upon the 
ballot? A. There was. 

Q. State in detail with respect to that ? A. The International 
Committee, and the representatives I think of one other organiza¬ 
tion, Mr. Hanson — he represented, I think, the Select Fusion 
ticket. He contended that the companies had no prior right and 
should not be permitted to have the left hand column; that they 
were not entitled to it, and it should be decided by lot. That was 
a subject of consultation and was talked over, and I finally decided 
in accordance with the rules usually followed, that the adminis¬ 
tration ticket was entitled to the left hand column — the first 
column. I explained to them that if they carried the ticket they 
would have that place the next year; that it should be explained to 
every one where the administration ticket was, and that if they 
wished to vote against it to use some other column. 

Q. Was there any provision in the law on that subject? A. 
There was not. There were also differences of opinion as to 
the form of the ticket. I finally adopted a form including each 
ticket within a single column between two lines. The Interna¬ 
tional Committee people wanted to have an official circle, similar 
to the Hew York State ballot. After full discussion of that 
matter, it seemed apparent to me that if the Committee had de¬ 
sired that they would have provided for it, and furthermore, when 
you get away from Hew York or from this country, hieroglyphics 
of that character were more likely to mislead the policy-holder 
that to lead him intelligently, so we eliminated that. That is a 
matter about which I consulted with Senator Armstrong. 

Q. Do you recall an extended conference over the last two 
questions which you had in the Attorney-General’s office? A. I 
do. 

Q. And at that conference Mr. Marshall, Mr. McIntosh and 
Mr. Hanson were present? A. Yes. 

Q. How long did that conference last? A. Quite a portion 
of one afternoon. 

Q. And that was over what? A. It included several of those 
questions. There was the circle and the name to be selected was 
talked over some, but not settled at that time; and the order of 
the tickets on the ballot; the certificate or statement that was to go 
at the top to show whether it was an official issue or not. They 
wished to have a little statement with a fac-simile of my signa- 



Testimony of Mr. Kelsey. 


255 


ture signed to it ; to show it was an official ballot, and they wished 
to have in large letters across the top, “ Official Ballot.” There 
were a great many differences of opinion. 

Q. There was a running fire of argument there during the 
whole conference? A. The whole afternoon; and also as to 
the instructions; there are quite a number of paragraphs of in¬ 
structions for executing the ballot. Nobody was able to agree as 
to just what should go into these instructions — how much of the 
statute, and in what form it should be put to give the clearest 
logical information. 

Q. Do you recall the question being raised as to whether the 
ballot should have a certificate signed by the Superintendent? 
A. Yes. 

Q. blow was that raised and what disposition did you make 
of it? A. Mr. Marshall talked with me on that question prior, 
I think, to the time we were at the Attorney-General’s office. I 
think that was his idea. He had a sample copy of a ballot that he 
had prepared and printed that had a short paragraph of two or 
three lines, with a fac-simile signature of the superintendent — 
or rather a space left for that. 

Q. What was your ruling on that proposition? A. It was 
against it. 

Q. And why ? A. I thought that under the statute it was not 
required and might mislead as to what the purpose of the state¬ 
ment was; because the companies were required to issue to every 
policy-holder the official statement — ballot — and they could use 
-it or not use it as they saw fit. I did not think I ought to certify 
that it was the official ballot. 

Senator Smith.— Mr. Kelsey stated that the companies were 
required to issue an official ballot, and that “ they ” could use it 
or not use it at their discretion. 

The Witness.— An official statement. They were required to 
issue an official statement that the election would be held and the 
names of the directors and giving instructions for the use of the 
ballot. 

Senator Smith.— You said “ they? ” 

The Witness.— I meant the voter could use it or not. 

By Mr. Mayer: 

Q. On account of the Senator’s question, the ballot, which in 
the statute is called the official statement, was something that after 




256 


Senate Judiciary Committee. 


the Superintendent had determined on its form, the company had 
no option about it? A. None whatever. 

Q. They had to send that out? A. Yes, to every policy-holder, 
with return envelopes and proxies. 

The Chairman.— We will now adjourn until 2:30 o’clock next 
Thursday afternoon. 

Mr. Hatch.— We are quite as anxious to proceed with the hear¬ 
ing as the Committee or anv one else can be and do not desire to 
delay this hearing a single instant; and in order that we shall not 
delay it and still present our entire case to the Committe, it is 
essential that we make some provision with respect to certain wit¬ 
nesses that we propose to call. Now, I have testimony here which 
would easily last Thursday, without the subpoenaing of any addi¬ 
tional witnesses; and then the witnesses mainly which I shall 
desire will come from New York City, and I to-day suggested to 
the Chairman of the Committee that perhaps the Committee would 
have to hold one session in the city of New York so that we could 
produce those witnesses, and that we would do our best to finish 
there with a single session. 

The Chairman.— ITow many witnesses do you expect to use 
from New York City? 

Mr. Hatch.-— Senator, I am not advised so that I am able to 
answer that question. There will be four or five, and it may run 
as high as ten. 

The Chairman.— Well, of course, should the Committee deter¬ 
mine to hear those witnesses, or issue subpoenas for them, I think 
it would be just as convenient for four or five witnesses to come to 
Albany as for a Committee of twelve or thirteen to go to New 
Y ork. 

Mr. Hatch.— Well, I suppose when I decide definitely what 
number of witnesses we will call at that time, I suppose that 
would influence somewhat the Committee’s action? 

The Chairman.— Yes. I think we had better let the matter 
rest as it is until we get through with Mr. Kelsey, and then we 
will consider any further application that you may make. 

Mr. Hatch.— Very well. 

(Further hearing adjourned until Thursday, March 28th, 1907, 
at 2:30 p. in.) 


257 


( 

Testimony of Mr. Kelsey. 


Proceedings Before the Senate Judiciary Committee on the Gover¬ 
nor’s Message, Dated February 20th, in Relation 
to the Superintendent of Insurance. 


Senate Chamber, Capitol, 

Albany, March 28, 1907. 

Proceedings Before the Senate Judiciary Committee on the Gov¬ 
ernor’s Message, dated February 20th, inj Relation to the 
Superintendent of Insurance. 

Present.— Senators Davis (Chairman), Armstrong*, Allds, 

Smith, McCarren, Taylor, Grady, Page, Raines, Cohalan, 
Cobb, Grattan and IIinman. 

Appearances.— As before noted. 

Otto Kelsey resumes the stand. 

Examination continued by Mr. Hatch: 

Q. Mr. Kelsey, I think when we finished at the dast hearing we 
were upon the subject of the ballots which you prepared, and the 
discussion of the particular .question was as to whether the ballots 
should have a certificate signed by the Superintendent? A. That 
was one of the questions discussed. 

Q. And that was in the discussion of which you spoke when 
your attention was called to this subject? A. Yes. 

Q. You recall whether the subject of extent of instructions and 
phraseology to be used on this ballot was the subject of discussion? 
A. It was all deliberated over in great detail. 

Q. By whom? A. Counsel for the various companies and for 
the various policy-holders’ organizations. 

Q. What did that discussion comprehend in that particular? 
A. The amount of information that should be put in and the 
form or arrangement so as not to have it confusing. 

Q. Was there any question raised about there being any blank 
space for the policy-holder to writ in? A. That was a matter I 
put in for my own notion, just below the tickets. 

Q. For what purpose? A. To enable the policy-holder to ex¬ 
press an opinion, and make certain of a vote in addition to the 
marking. 

17 



25 8 


Senate Judiciary Committee. 


Q. Was there any discussion as to whether there should be a 
space for the number of the policy? A. Yes. 

Q. What was the opinion as to that? A. Difference of opinion 
as to whether the statute required it. 

Q. Was each of those questions the subject of debate by all the 
gentlemen then before you ? A. It was. I do not think there was 
half a dozen words on the face of the sheet which were not debated 
considerably. 

Q. Do you recollect a discussion over the printing of the names 
in single or double columns ? A. Yes. 

Q. What was there as to that? A. As to the form whether it 
should be one continuous column or whether it should be sub¬ 
divided into two columns. 

Q. And these questions were raised because the law upon that 
subject was silent? A. It was not definite enough to indicate 
what should go on. It said in general terms that certain things 
should be shown by the statement. 

Q. And all these different men have different views on these 
questions ? A. Yes, and we had to work out a solution. 

Q. And it was ultimately worked out by you ? A. It was — 
the final decision. 

Q. Do you recollect as to how it should be designated? — 
whether “ official ballot ” should be upon it? A. There was a 
difference of opinion upon that. 

Q. W T hat was finally determined ? A. It was called following 
the language of the statute, “ The Official Statement/' and it be¬ 
came a ballot when it was executed. 

Q. Do you recollect whether there was any discussion over the 
proxies in the preparation of the form? A. There was. 

Q. State in detail what there was of that question ? A. There 
were many forms submitted, and the final form was determined 
upon by me. 

Q. And do you recollect the number of forms that were sub¬ 
mitted ? A. I should say four or five. 

Q. Who submitted them? A. The Equitable, the Security 
Mutual had one, and I think Mr. Marshall, and I think Mr. Mc¬ 
Intosh for the Yew York Life. 

Q. Will you state to the committee whether or not each gentle¬ 
man who presented a particular form in the regard urged the 
adoption of that particular one? A. They did. 

Q. And an argument was had over each ? A. There was. 


259 


Testimony of Mr. Kelsey. 

f 

Q. And you made final determination, did you? A. I drafted 
tiie one settled upon, myself. 

Q. You drafted it in your own language? A. Yes. 

Q. After hearing the other arguments? A. Yes; talking sug¬ 
gestions from the other forms. 

Q. Now I show you a paper and ask you what it is ? A. This 
is the form of the official statement, and return envelopes to the 
Yew York Life, printed in foreign languages. 

Q. That is the New York Life Insurance Company? A. Yes. 

Q. And in how many languages is it printed ? A. I do not 
remember; I think it is fourteen. 

Mr. Ainsworth.— Nineteen. 

Mr. Hatch.— I desire to offer those in evidence. 

(Marked Exhibit 89.) 

Mr. Ainsworth.— There are ballots in the German, the Danish, 
the Swedish, the Russian, the Bulgarian, the Spanish, French, 
Dutch, Italian, Polish, Bohemian, Hungarian, Norwegian, Ser¬ 
vian and Portugese. 

Senator Raines.— Is the English form there ? 

Mr. Ainsworth.— Yes, sir. 

Senator Jlaines.— And the others follow the English form? 

Mr. Ainsworth.— They do; yes, Senator. 

Senator Raines. 1 — Those are translations of the English ballot 
into these foreign languages ? 

Mr. Ainsworth.— Yes, sir. 

Q. Now the whole of the matter, Mr. Kelsey, appearing upon 
that ballot there was the subject discussed in detail in the various 
conferences to which you have called attention. A. It was. 

Senator Page.— You do not propose to claim Mr. Kelsey 
wrote this in all these different languages? 

The Witness.-—It was stated the other day in relation to ask¬ 
ing to have them printed in the other languages, that I stated I 
would only vouch for the English form and that they took the 
responsibility of its being identical after translation into other 
languages. 

Mr. Hatch ( resuming ) : 

Q. But the subject-matter as to the language which should ap¬ 
pear on the ballot, that was the subject of discussion by these 
people? A. It was. 

Q. And that was determined afterwards by you? A. It was. 

Q. Who made the arrangement with respect to the printing of 
that ballot? A. I did. 









260 


Senate Judiciary Committee. 


Q. The typographical part you determined? A. Les, sir. 

Q. Was that done by you? A. Yes; I determined the size 
of type and the display. 

Q. Now I show you another paper; please state what it is? 
A, The Mutual Life Company’s official statement. 

Q. And is that the same with respect to the form? A. Yes, 
sir. There are three tickets on the Mutual Life, instead of two. 

Q. But the general form of the ticket is the same? A. Ex¬ 
cept for the extension it is identical. 

Q. Bo you remember how many languages that was printed 
in? A. I do not recall the number; it was a matter that was up 
for discussion. 

Q. You prepared the English form, and it was printed, and 
translations made of it into the other languages? A. Yes, sir; it 
was. 

Q. Bo you remember how many? A. I think there are eleven. 

Q. Does it appear on No. 1 sheet, that two languages are 
there, the English language and the translation? A. It appears 
from the sheets themselves which are in evidence. 

Mr. Hatch.— I will ask to have those marked. 

(Marked Exhibit 90.) 

Q. I show you another paper or rather a bundle of papers. 
State what they are? A. The return envelopes for the New 
York Life. 

Q. The return envelopes of what? A. For the official state¬ 
ment, for the return of the ballot. 

Q. Is that required by law? A. Yes, sir; one of the require¬ 
ments of the statute that the official statement and the return 
envelope and form of proxies should be sent to every policy¬ 
holder with prepaid postage. 

Q. And these envelopes and these ballots complied with that 
requirement of the law? A. They did. 

Q. What section of the law is that? A. Section 94. 

Q. I offer in evidence extract from the Preliminary Report of 
he Superintendent of Insurance dated February, 1907, propos- 
*g changes in section 94. 

(Marked Exhibit 91.) 

Mr. Llatch.— I will read that in: 

“ Section 94. Election of Directors.— To create a scheme for 
an election of directors of a corporation by its policy-holders scat¬ 
tered throughout the entire world is an undertaking of such 
magnitude and difficulty as to be realized only by those engaged 




Testimony op Mr. Kelsey. 


261 


in the work. In the plan devised by which policy-holders might 
sustain the management of their companies or declare for a 
change of administration, many provisions have been found in¬ 
definite and conditions have developed which could not have 
been foreseen by the framers of the law, as the experiment is the 
first election of its kind and there was no precedent even by 
analogy. The record here considered is complete to the closing 
of the polls, December 18,' 1906, from which date a separate 
review may be desirable when the canvass shall have been finished 
and the facts relating thereto are obtained. 

The. procedure for filing lists of policy-holders, nominating 
candidates, furnishing policy-holders with information and in¬ 
struction and securing a return of ballots have been so construed 
and enforced as to have produced no serious friction nor com¬ 
plications in the work, although receiving criticism for defects of 
supposed omission in the drafting, by which alleged advantages 
were possible in aid of certain nominees. The Legislature may 
deem it best to allow the present section to stand without amend¬ 
ment in preference to the risks of further clauses which might 
unsettle rather than clarify provisions tested and construed in 
practice. If, however, amendments are to be submitted, experi¬ 
ence suggests among modifications not affecting the general plan 
but important in its practical operation the following: 

It is questionable if regulations for filing and maintaining 
lists of policy-holders by companies should remain in the present 
form. 

All ambiguity should be removed from provisions relating to 
the application of section 94 to election ,of directors in domestic 
stock life insurance corporations. 

Voting by proxy should be eliminated if the features of voting 
by mail is retained. 

Ballots returned by policy-holders should be to one address and 
in sealed envelopes. 

The Superintendent of Insurance or other designated public 
officer should co-operate in or control the receiving of ballots by 
mail and their custody until delivered to the inspectors of elec¬ 
tion on the date of the election. 

If the ballot received by mail is executed in conformity to the 
statute the vote of the policy-holders should not be invalidated by 
a defective endorsement upon the envelope or wrapper enclosing 
such ballot. 


262 


Senate Judiciary Committee. 


i • • -> 


A definite date should be fixed as the first when a ballot can be 
executed. 

Appointment as inspector of election should not be restricted 
to policy-holders of the company. 

At the hour of closing the polls if voters are in attendance or 
ballots are offered, provisions should be made for inspectors of 
election to accept all ballots then awaiting an opportunity to be 
cast. 

The law should state whether the number of policy must be 
inserted in the ballot by a policy-holder in his own handwriting. 

Provisions should be made for removing the name of a person 
from a ticket when placed there as a candidate against his will or 
when improperly printed thereon as a nominee. 

To some extent it appears equitable that the principle of 
minority representation upon every ticket should be acceded to. 

Q. Now the form; I ask you to state whether or not it complied 
with the statute, the form that appeared upon these return en¬ 
velopes which have been marked. I ask you whether that matter 
was prepared by you ? A. It was. The form of endorsement on 
the envelope, and I also directed that the return envelope be 
printed in red ink so as not to mix it with the other company mail. 

Q. So that it could be separated at once ? A. Yes, sir, there 
are so many letters coming to those companies that it could be 
easily separated from the other mail, and there was no danger of 
opening the wrong envelope. 

Q. I show you a paper: What is that? A. It is a letter from 
Mr. Louis Marshall, dated September 7, 1906, in relation to the 
proposed form of statement and instructions. 

Q. The letter contains an argument, does it not? A. It does. 

Q. Upon the subject to which your attention has been called? 
A. It is in the nature of a brief, paragraphed and numbered as to 
objections and criticisms of the form. 

Mr. Hatch.— I ask to have it marked. 

(Marked Exhibit 92.) 

Mr. Hatch.— I desire to have this read in evidence so that it 
may appear in full to the Committee what questions Mr. Kelsey 
was called on to pass upon as presented by the lawyers of these 
companies. The letter is as follows: 

Exhibit No. 92 is as follows: 




Brief of Mr. Marshall. 


263 


New York, September 7, 1906. 

Dear Sir: * 

Y ours of the 5th inst. with a proposed form of statement and 
instructions to be issued to the policy-holders of the several in¬ 
surance companies which are to hold elections for directors on De¬ 
cember 18, 1906, pursuant to the provisions of chapter 354 of the 
Laws of 1906, has just reached me. 

I am quite sure that it is not your intention to unduly favor the 
existing management of the Mutual and New York Life Insur¬ 
ance companies, or to embarrass and confuse the policy-holders in 
the expression of their choice of directors; yet, after careful con¬ 
sideration of your proposed form, I must frankly say that if you 
adhere to the form which you have sent me for inspection, you 
will unquestionably discriminate against the body of the policy¬ 
holders, and render efficient aid toward the perpetuation of the 
regime which has been so justly criticised and whose abuses have 
led to the enactment of the legislation under which the impending 
election is to be held. 

Permit me to briefly call your attention to a number of criti¬ 
cisms which at first blush suggest themselves to my mind, and 
which have impressed themselves on the members of the Inter¬ 
national Policy-holders’ Committee, who have given the subject 
intelligent consideration. 

(1) The very first thought that the sight of the document 
arouses, is that the New York Life Insurance Company is issuing 
a circular, or advertising matter, of the same general nature that 
has been distributed by insurance companies for some time past. 
There is nothing to indicate to the voter, that he is receiving a 
paper which may be used as a ballot for the directors of the cor¬ 
poration. The first line, which is printed in unobtrusive type, 
does not indicate the information which the statute intends to con¬ 
vey to the policy-holders, namely, that it is practically a form of 
ballot which will facilitate the expression of the wishes of the 
policy-holders. As it is printed, the average man on receiving it, 
would consign it to his waste-paper basket. 

(2) There is nothing to show that the paper has been officially 
approved by the 'Superintendent of Insurance or that it has re¬ 
ceived his sanction. If suitable words appeared at the top or bot¬ 
tom of the “ Statement ” showing that its form was approved by 
ihe Superintendent of Insurance, it would satisfy the doubts and 
suspicions of the policy-holders, and assure them that by using 


264 


Senate Judiciary Committee. 


it they would not become the victims of the trick and device of 
those whose motives they, whether justly or unjustly, question. 
There certainly can he no objection to such authentication. The 
Superintendent, when he approves of the form of statement, will 
so indicate on the original which will be filed in his office. Bv 
transcribing on the printed statement such form of approval, he 
is hut sending to every policy-holder an exact transcript of the 
statement on file in his office. On the other hand, the omission of 
such certificate will lead many policy-holders to abstain from vot¬ 
ing and will embarrass them in the exercise of their statutory right 
of suffrage. Surely, everything should be done by the Superin¬ 
tendent of Insurance to allay all doubts and to encourage the 
policy-holders to exercise their right of voting, unhampered and 
with the least amount of inconvenience possible. 

(3) The words “ Election of Directors to he held December 18, 
1906,” should be the most prominent words in the caption, and 
should precede the name of the insurance company. The number 
of directors to be elected should also be made prominent, so that 
the policy-holders cannot through inadvertence overlook the fact 
that they are entitled to vote for twenty-four directors and no 
more. 

(4) The names of the directors whose terms expire, while re¬ 
quired by the statute to be placed upon the statement, should cer¬ 
tainly not be arranged in the manner indicated by the form sub¬ 
mitted. They should not be printed in columns, or in type of the 
same size or character as that in which the name of the candidates 
are printed ; neither should they be printed at the top of the state¬ 
ment. since a voter might be apt to mistake the names of the 
directors whose terms expire for those of candidates, and confusion 
would result. In the form submitted by Mr. McIntosh, the names 
were printed in the manner which I have indicated, and not, as I 
recollect it, at the top of the ticket. 

(5) Your proposed form places the names of the persons ap¬ 
pointed to receive proxies immediately under the title of the ticket, 
and ahead of the names of candidates. The statute makes no pro¬ 
vision for the names of the proxies in connection with the names 
of the candidates. They are not to be voted, and need only 
be stated in connection with the instructions for the use of the 
proxy. The language of the statute is: 

Such statement shall be conveniently arranged under the 
names or titles by which the nominations have been designated 



Brief of Mr, Mars iiare. 


265 


and shall have printed upon it the name of the company, the post- 
office address of its home office the number of directors to be 
elected, and the names of those whose terms expire, the date of 
the election and the instructions as herein provided for the use 
thereof as ballots or for the use of a proxy as herein provided and 
a designated space for the signatures of the policy-holders and of 
a subscribing witness.” 

The statute does not call for the printing of the names of the 
proxies in the form submitted. The verv fact that the statute 

tV 

provides for the signatures of the policy-holder and a subscribing 
witness, indicates that it is its purpose to enable the policy-holder 
to use the statement as a ballot, and the statute so declares in ex¬ 
press terms. When so used by the policy-holder, it is of no pos¬ 
sible consequence who is named as proxy, since voting by proxy is 
regulated by other provisions of the statute. To print the names of 
the proxies immediately under the title by which the nominations 
are designated, will puzzle not only the average policy-holders, but 
also those who have had extensive experience in corporate affairs. 

(6) The names of the candidates should be printed in a single 
column, and not in double column. This certainly is important 
in view of the fact that the names of directors whose terms expire 
are, in the submitted form, printed in practically the same style, 
both as to arrangement and typography, as are the names of can¬ 
didates. 

(7) In the form submitted, the administration ticket is printed 
in the left hand column. I must assume that this has been done 
merelv because of the fact that thus far no other ticket has been 
nominated. If it is intended, however, to give to the administra¬ 
tion ticket eventually the left hand column, then I most emphat- 

. ically protest against such a course. That position is, by those 
familiar with political affairs, considered as embodying certain 
advantages, psychological perhaps in their character, but advan¬ 
tages nevertheless. Poltical parties strive for that position, and 
the statute with regard to political elections has considered it of 
sufficient importance to lay down a rule with respect to the posi¬ 
tion of the several tickets placed in nomination at a general elec¬ 
tion upon the official ballot. The Insurance Law contains no pro¬ 
visions on the subject, but leaves the determination of the form of 
the ticket to the Superintendent of Insurance, in reliance upon his 
presumed fairness. Under the circumstances the only fair solu¬ 
tion of the question of position would be, to leave it to bo deter- 


Senate Judiciary Committee. 


266 

mined by lot in the same manner that section 3 of chapter 1T3 of 
the Laws of 1906 provides for the division of the newly elected 
boards of directors into two classes by lot. The interests which I 
represent will not rest content with any other disposition of tins 
question, and regard a determination of it by arbitrary selection 
in favor of the administration ticket as an unwarranted act of 
favoritism, to which charge I am sure you will not subject your¬ 
self. 

(8) The statute does not provide for a date, and there is no 
reason why the ticket would be dated, especially since it is not to 
be issued until after October 18, 1906. 

(9) Neither does the statute provide for placing a policy num¬ 
ber upon the ballot. That is only required on the return envelope 
and on the proxy. 

(10) As the ticket is printed, there is nothing to indicate to 
the policy-holder how he shall indicate thereon his choice of can¬ 
didates. It is true that the names will appear upon the ticket, but 
the ordinary voter would be at a loss'to understand just how he is 
to express his choice. The more thought that I have given to the 
subject, the stronger is my opinion that there should be under the 
name of each ticket a circle, and opposite each name a square, so 
that the voter may either vote a straight ticket, by placing his 
mark within the circle, or may indicate by a mark opposite the 
names of the candidates for whom he may desire to vote, his in- 
tention to vote for them. That method is simple, equally fair to 
all candidates, is in accordance with the well understood methods 
of voting at elections, avoids confusion, and facilitates the policy¬ 
holder in the exercise of the prerogative. 

There is nothing in the statute which prohibits such manner of 
voting. By its very terms it permits every method of expression. 
The policy-holder is permitted to indicate the name of the 
nominee or nominees for whom he desires to vote. IIow can he 
better indicate it in the event that he desires to vote a straight 
ticket, which will be the case with probably ninety-nine per cent, 
of all the policy-holders, than that he shall be permitted to indi¬ 
cate such intention by voting in a circle ? 

The statute also provides that the voter may strike out the 
name or names of those for whom he does not desire to vote, or 
may otherwise suitably indicate in writing, the name of the 
nominee or nominees for whom he desires to vote. What more 
suitable indication of such desire can there be, than by means of a 


Brief of Me, Marshall. 


267 


vote in the circle? And why should not the statement he so 
printed as to enable the policy-holder, if he desires to vote a 
straight ticket in the manner indicated, to do so? 

Let the circle be printed under the name of the ticket, and let 
the instructions state that if the policy-holder desires to vote a 
straight ticket, a cross within the circle will be construed as an 
expression of such desire. The entire object of the statute being 
to enable the policy-holder to have a voice in the selection of di¬ 
rectors, and to have every facility for expressing his wish, it is be¬ 
lieved to be the duty of the Department, to so frame the statement;, 
which is in reality a ballot because the statute so declares it to be 
when it is used, as to afford a medium for the expression of such 
wish as can be understood and availed of by every class of policy¬ 
holders, whether learned or otherwise, experienced in business 
affairs or not. One thing is certain — that the voting which pre¬ 
vails at political elections is familiar and particularly that method 
which includes voting in the circle, and the statement should 
therefore indicate to voters that if they desire to do so, they may 
use that method. 

The Superintendent of Insurance has very wisely decided, that 
under the name of candidates there should be a blank space of 
several lines, in which the voter may express his intention in any 
form which may appeal to him. Why not, therefore, act on the 
same broad principle, and enable the voter, if he wishes to do so, 
to vote in the circle ? bTo harm can be done by placing the circle 
on the ticket, with appropriate instructions as to its use, and in¬ 
finite good would certainly result from the adoption of such a 
course. The path of the voter should be made easy; every possible 
method of expressing his intention should be open to him; he 
should have as many guide-posts to direct his steps as it is possible 
to provide, and it would be most unfortunate if he should be left 
in doubt with respect to the course with which he is most familiar, 
and which would best serve to indicate his purpose as a voter. 

The “ Instructions for use of the Statement as a Ballot ” recog¬ 
nizes, as does likewise the statute, that the statement, when used 
would be a ballot. Why then should there be any chariness with 
respect to the printing of the statement in such form as to in¬ 
dicate to the policy-holder that lie may use the statement “ as a 
ballot ” and to furnish him with every method which can be rea¬ 
sonably suggested for availing himself of that privilege ? 

With all due respect, I submit that the document which has 


I 




268 


Senate Judiciary Committee. 


been presented by you studiously avoids every indication that the 
statement may be used as a ballot. 

(11) Under the bead “ Instructions for use of Statement as a 
Ballot/' you are ostensibly quoting from the statute with respect 
to the qualification of voters, but not accurately, since the statute 
says that “ Every such policy-holder,” i. e., whose insurance shall 
be in force and shall have been in force for at least one year prior 
to the date of the election, “ and every other person having a right 
to vote by virtue of any contract made prior to the enactment of 
section 94 which shall remain in force until the date of such 
election, shall be entitled to vote in person or by proxy or by mail, 
as herein provided.” You have omitted the words “ and every 
other person having a right to vote by virtue of any contract,” 
etc. I construe these words as including the holder of a contract 
for the payment of annuity or a paid-up policy of insurance, and 
all other forms of contracts which have in recent years been issued 
by insurance companies, some of which are not, in strict parlance, 
known as insurance policies, yet, under the statute, they are all 
entitled to vote. 

(12) You state that the polls are Jo open at ten o’clock in 
the forenoon and to close at four o’clock in the afternoon on the 
18th day of December, 1906. While section 94 specifies these 
hours for election in general, chapter 354 of the Laws of 1906, 
which relates specifically to the election of December 18, 1906, 
does not specify these hours, and in my view a ballot presented 
at any time on that day would have to be received. 

(13) The criticism just made applies to the clause in your pro- 
posed form in relation to voting in person. 

(14) The instructions which you have prepared do not state 
in the language of the statute, that “ the votes at the election ” 
shall be limited to the candidates specified on the statement, except 
in the case of death or incapacity, etc. Under your proposed 
form a policy-holder might understand himself to be at liberty to 
vote for any nominees whom he may select. 

(15) The instruction should also explain the effect of voting 
under the circle, or in the squares opposite the names of the sev¬ 
eral persons designated on the tickets placed in nomination. 

(16) Tn the last paragraph of the instructions for the use of 
the statement you say, “ that no policy-holder may vote for more 
than the number of directors so to be elected.” This is not suffi¬ 
ciently definite. Tn the case of the Yew York Life Insurance 



Brief of Mr. Marshall. 


209 


Company it should state that no policy-holder may vote for more 
than twenty-four directors; in the case of the Mutual Life Insur¬ 
ance Company, that he may not vote for more than thirty-six 
directors. Such a statement would be strictly accurate, and the 
policy-holder would not be under the necessity of construing the 
statute or the ballot. It is true that at the head of the ticket it 
appears how many directors are to be elected, yet in the form in 
which you have printed the ballot it would be very easy for a 
policy-holder to overlook that statement. 

(17) Under “Instructions for the use of a proxy ” it would 
be appropriate, and in my judgment it would be the only appro¬ 
priate place in which to state who the persons who are to receive 
proxies for tickets. Under the form which you have suggested a 
policy-holder might fall into the blunder of believing that the only 
way in which he can vote would be through proxies, especially in 
view of the fact that there is nothing in the form of the state¬ 
ment which would indicate that it could be used as a ballot by the 
policy-holder himself. 

(18) Your instructions do not indicate that the blank form of 
proxy enclosed with the statement, may be used by the policy¬ 
holder. Your instructions are very general and do not apply to 
the concrete'case which is presented by the blank proxy which is 
required by the statute to be forwarded to the policy-holder. 

(19) Inasmuch as the proxy cannot be forwarded to the policy¬ 
holder prior to October 18, 1906, it would seem that the state¬ 
ment that the proxy would not be valid unless executed within 
two months prior to the date of the election, etc., is entirely un¬ 
necessary, and is apt to become a source of confusion. 

I am very much in earnest in this matter, and am very anxious 
that you should not proceed hastily in finally determining the 
form of the statement. I wish another opportunity to discuss the 
matter with you, and will take the liberty of either calling on you 
Tuesday afternoon or evening, on my return from the Appellate 
Division at Saratoga, or on such other day as you may fix. 

You will of course appreciate that I am asking for nothing 
which I am not perfectly willing to grant to the administration 
ticket. I am seeking no advantages, real or fancied. I am 
merely asking for a form of ballot — because that is what this 
amounts to — which is intelligible, simple, easy of comprehension, 
and the use of which will facilitate the expression of their views 
on the all important subject as to who shall be directors of these 


270 


Senate Judiciary Committee. 


important corporations, by the policy-holders, who are the only 
persons interested in the result of the election, and who alone 
have property rights at stake. 

The purpose of this election, as is indicated by the legislation, 
was to begin with a clean sheet. Every existing director, was, in 
the most emphatic terms, legislated out of office. It was not in¬ 
tended that those who had thus placed upon them the seal of legis¬ 
lative condemnation, should receive any possible preference, or 
that any public officer should, in the formulation of the ballot, or 
in the arrangement of it, do anything which, in the view of a 
large proportion of the policy-holders and their representatives, 
could be construed as an act of grace or favor to the outgoing ad¬ 
ministration. 

What we desire is fair play and half the road — no more or no- 
less, and we most strongly protest against the form of ballot which 
you have submitted, because it does not in our judgment, con¬ 
form to that very simple and equitable test. 

Very truly yours, 

' LOUIS MARSHALL. 

Honorable Otto Kelsey, 

Superintendent of Insurance, Albany, N. Y.” 


“September 11, 1906. 

Hon. Louis Marshall, 30 Broad Street, New York: 


Dear Sir.— Your favor dated the 7th inst., with criticisms of 
proposed form of statement under section 94 of the Insurance 
Law to be approved by the Superintendent, and recommenda¬ 
tions in relation thereto is received this morning. I feel obliged 
for your careful attention to the matter and a full and frank 


expression of your views. Detailed objections and suggestions 
have been received also from counsel for the two large insurance 
companies most interested in the result of the elections. 

A painstaking review of all papers filed and an examination of 
each objection and argument presented in your communication 
will be undertaken before final action by the Department. The 
importance of the subject and the responsibility placed upon the 
Superintendent to deal justly as between contending partisans, 
and to perform his full duty to the body of policy-holders in 





Testimony of Me. Kelsey. 


271 


providing a simple, clear and complete statement for their in¬ 
formation and assistance in voting for directors, is appreciated. 
That duty will be discharged as fairly and impartially as I am 
able to determine it. 

Many of your suggestions will be accepted and where questions 
under the statute seem in doubt I shall further consult with the 
Attorney-General and with Senator Armstrong, who have advised 
me heretofore, and who are as well qualified and as disinterested 
in giving counsel as can be found available. 

I regret that an engagement compels my absence from Albany 
this Tuesday afternoon, as you inform me that you may call at 
the Department. 

Very respectfully, 

OTTO KELSEY, 

Superintendent.” 


“September 22, 190G. 

ILon. Otto Kelsey, Superintendent of Insurance: 

Dear Sir: 

I have just received copies of the latest form of statement to 
be sent to the policy-holders of the Mutual and Hew York Life 
Insurance companies. While it is a great improvement on the 
first sketch, I have two important criticisms to make: 

(1) That you have given to the Administration Ticket the 

left hand column. 

(2) That you have made no provision for voting by a mark in 
a circle placed above each ticket, and I might add 

(3) There is no proper space left in front of each name, for 
placing a check-mark. 

So to the first proposition, I can only repeat what I have said 
in my last letter to you. It is generally supposed that a certain 
advantage is given to the ticket holding the left hand column. 
Politicians so believe, and human nature is so constituted as to be 
affected by what at first blush may appear to be trivial considera¬ 
tions. The only fair and impartial disposition of the question of 
arrangement, is to permit if to lie determined by lot, permitting 



272 


Senate Judiciary Committee. 


representatives of eacli of the tickets to attend at the time of 
making the selection. 

As to the second proposition, I can add nothing to what I have 
already said except the fact that the counsel for the Mutual Life 
Insurance Company, or rather of the administration ticket 
made the same suggestions. It would certainly simplify voting, 
and counting, etc., ballots to resort to the very simple device — 
with a simple explanation in the instruction as to how it may be 
used. 

I also object to the printing of the name of Charles E. Hughes, 
at the head of the Selected Fusion Ticket. The motive of the 
creators of this bogus ticket in using his name against his con¬ 
sent is obvious. It is a dishonest effort to deceive the policy¬ 
holders and to induce them to vote for a ticket which they are 
falsely given to understand bears the endorsement and approval 
of the counsel of the Armstrong Committee. This as you know 
from his emphatic statements is absolutely untrue. Why then 
should the Insurance Department give the slightest countenance 
to such a swindle, when the whole subject for arranging and 
formulating the statement is left to your discretion ? Of course, 
I would protest against that ticket being headed by the name of 
“ James U. Adam ”, by whom our ticket is headed, but not if it 
should be headed by Hugo Bering. That would deceive nobody. 
Nothing that I have said is to be deemed as a recognition of the 
validity to the “ Selected Fusion Ticket ” or as aught but the 
most emphatic and contemptuous disapproval of the use of the 
names of any of the candidates appearing on the “ United Com¬ 
mittees Ticket,” all of whom object to the unauthorized and 
wanton abuse of their names. 

Kindly reconsider your action in the light of these views. 

Very truly yours, 

LOUIS MARSHALL. 

“September 25, 1900. 

lion. Louis Marshall, Care of Guggenheimer, L ntermyer & 
Marshall, 30 Broad StreetNew York City: 

Dear Sir.— Superintendent Kelsey directs me to advise you 
that he has given his personal and careful consideration to the 
criticisms contained in your letter of the 22nd inst. and to the 
forms and arrangement of the statements for the Mutual and 





Testimony of Mb. Kelsey. 


Kew York Life Insurance Companies and regrets that he is 
unable to comply with any of the suggestions made. 

Respectfully yours, % 

HENRY I). APPLETON, ’ 

Second Deputy Superintendent/’ 


a 


Of course my objections as to the arrangement of the ticket 
pplies to that of the New York Life as well/ 7 


]\Ir. Ainsworth. that covers the letter and the replies to the 
letter. 


By Mr. Hatch: 

Q. Mr. Kelsey had you received other briefs and statements 
from other companies ? A. I had. 

Q. And was this form of ballot made up bv you after consider- 
ation of the brief which has just been read and all the other 
statements which have been submitted? A. It was. 

Q. In addition to this brief, did you have other' correspond¬ 
ence upon the subject ? A. I did. 

Q. With whom? A. I could not recollect. 

Q. I hand you some papers. What are they ? A. They are 
letters in relation to the voting of the policy-holders, errors, com¬ 
plaints, etc., in connection with the election. 

Q. From whom? A. The International Committee. 

Q. Do you know how many complaints there are there ? A. I 
do not. 

Q. About? A. I couldn’t say; they have been tabulated. 

Q. What does that tabulation show? A. Sixty-one. They are 
numbered consecutively right through the package. 

Mr, Hatch.— I desire to have those marked in evidence. 

(Marked Exhibit 93.) 

Mr. Mayer.— I will read an abstract of the various complaints 
contained in that exhibit just marked, in communications received 
from the International Policy Holders’ Committee only. 

94-D-l. Complaint of Samuel Untermyer relating to large and 
improper expenditures of money by the New York* and Mutual 
Life Insurance Companies. 

9I-D-2. Samuel TTntermyer in relation to advertisements, lists 
of policy-holders, and use of stencils. 

94-D-3. In relation to expenses incurred for sending circulars 
to policy-holders by the Mutual Life Insurance Company. 






274 


Senate Judiciaky Committee. 


94-D-4. Relating to expenses of mailing circulars by New York 
Life Insurance Company. 

94-D-5. Relating to complaint for expenditures on account of 
advertising. 

94-D-6. Relating to lists of policy-holders filed in Department. 

94-D-7. Relating to errors in lists of policy-holders. 

94-D-8. Relating to copy of lists, New York Life Insurance 
Company. 

94-D-9. Advertising matter of the International Policy-holders* 
Committee. 

94-D-10. Relating to letter being sent out by managers of the 
Mutual Life Insurance Company. 

94-D-ll. In relation to obtaining for the International Policy¬ 
holders’ Committee copies of the stencil list of Mutual Life. 

94-D-12. Complaint relating to circular being mailed by New 
York Life. 

94-D-13. Relating to circular mailed by New York Life. 

94- D-14. Relating to stencils of Mutual Life. 

95- D-15. Complaint of Samuel Untermyer, improper expenses 
of the Mutual Life. 

94-D-16. Relating to improper use of money by New York 
• and Mutual Life Insurance Companies. 

94-D-17. Relating to form of petition circulated by New York 
Life Insurance Company. 

94-D-18. Relating to campaign document, Mutual Life Insur¬ 
ance Company. 

94-D-19. Relating to gathering proxies by life insurance 
companies. 

94-D-20. Relating to canvassing by agents of the New York 
Life Insurance Company. 

94-D-21. Relating to campaign document of the Mutual Life 
Insurance Company. 

94-D-22. Relating to forms of official statement, proxy, and 
printed return envelopes. 

94-D-23. Relating to the activities of the agents and man¬ 
agers of New York and Mutual Life Insurance Companies. 

94-D-24. Relating to the activity of New York Life agents in 
furthering election of the Administration Ticket. 

94-D-25. Relating to the activity of the agents of the New 
York Life Insurance Company. 

94-D-26. Relating to form of statement of nominations, etc. 



Testimony of Me. Kelsey. 


275 


94-D-27. Relating to the matter of Angus Allmon. 

94-D-28. Relating to agents of Mew York Life Insurance Com¬ 
pany canvassing for votes. 

94-D—29. Relating to Mutual Life ballots alleged to be printed 
in violation of law. 

94-D-30. Relating to postal card issued by Mew York Life fix¬ 
ing date of voting. 

94-D-31. Relating to Mutual Life ballots alleged to be printed 
in violation of law. 

94-D-32. Enclosing affidavit relating to Mutual ballots printed 
in violation of law. 

94-D-33. In relation to Policy-holders’ Ballot sent out by 
Mutual Life Insurance Company. 

94-D-34. Relating to ballot sent out by Mutual Life Insurance 
Company. 

94-D-35. Relating to circular used by agents of the Mew York 
Life Insurance Company. 

94-D-36. Relating to a letter from “ Policy-holders’ Protective 
Association.” 

94-D-37. Relating to marked, ballots mailed by agents of the 
Mew York Life Insurance Company. 

94-D-38. Complaint of Louis Marshall in re communication 
from M. I). Herron. 

94-D-39. In relation to the mailing of official statements by 
Mew -York Life Insurance Company. 

94-D-40. Relating to acts of agents of the Mew York Life In¬ 
surance Company. 

94-D-41. Relating to the sending of mutilated tickets to policy- 
holders of Mew York Life. 

94-D-42. Relating to the number of ballots received by the 
Mutual and Mew York Life Insurance Companies. 

94-D-43. Relating to refusal of Mutual Life Insurance Com¬ 
pany to allow Committee use of stencils. 

94-P-44. Relating to the so-called form of ballot mailed by the 
Mutual Life Insurance Company. 

94-D-45. Relating to “ advances ” by managers or agency direc¬ 
tors of the Mew York and Mutual Life Insurance companies. 

94-D-46. Relating to the non-receipt of forms of ballot mailed 
by the International Policy-holders’ Committee. 

94-D-47. Relating to canvassing matter mailed by John L). 
Eremd, district manager Mutual Life Insurance Company. 


270 


Senate Judiciary Committee. 


94-D-48. Relating to ballots signed bv agents as subscribing 
witnesses. 

94-D-49. In relation to the action of employees in the offices of 
the New York and Mutual Life Insurance Companies. 

94-D-50. Complaint relating to T. Howard Lewis. 

94-D-51. Relating to non-receipt of ballots mailed by Inter¬ 
national Policy-holders’ Committee. 

94-D-52. Relating to the soliciting of votes by employees and 
representatives of the Hew York and Mutual Life Insurance 
Companies. 

94-D-53. In relation to the matter of T. Howard Lewis. 

94-D-54. Relating to the “ Peabody Trick Ballot.” 

94-H-55. Relating to circular letter, etc., sent out by J. J. 
Cornveaux, general agent Hew York Life. 

94-D-56. Relating to ballots, complaints, etc. 

94-D-57. In relation to the conduct of agents of the Hew York 
Life Insurance Company outside of the City of Hew York. 

94-D-58. Relating to the lack of official ballots in Detroit, 
Michigan. 

94-D-59. Relating to “ campaign literature ” used by H. Davi¬ 
son, agent Hew York Life, Chicago. 

94-D-60. Relating to circular letter, etc., used by P. W. Ward 
and Jesse B. Fay. 

94-D-61. Relating to 4he selection of inspectors of election in 
the Mutual Life and Hew York Life Insurance Companies. 

Mr. Hatch (resuming) : 

Q. What did you do with these complaints, Mr. Ivelsey? A. As 
complaints were received they were acknowledged and transmitted 
to the company complained against, with the demand for an ex¬ 
planation. When the answer was received it was transmitted 
to the International Committee. If the matter was one which 
was substantiated, or if there Avas an apparent transgression, I 
directed its correction, and so advised them. 

Q. Did you do that in each instance ? A. Every time. 

Q. Did you find any matters complained of that vou corrected? 
A. I did. 

Q. Did you find many? A. I could not tell vou how many. 

1 t 

Q. Were they numerous ? A. Yes, sir. 

Q. After you had decided on the form of the ballot to be used 


Testimony of Mr. Kelsey. 277 

at the election, did you transmit a copy of the ballot to Governor 
Hughes ? A. I did. 

Q* I show you a letter. Is that the letter transmitting it ? A. 
It is. 

Q. Head it please ? A. The letter is dated September 20th, 
190G, and is as follows: 


u 


lion. Charles E. Hughes, 570 1 Vest End Avenue, New York. 

Dear Sir: lor your information I enclose herewith a copy 
of the approved form of statement as finally completed for the 
use of the Hew York Life and the Mutual Life Insurance Com¬ 
pany in the forthcoming election for directors. 

Very respectfully, 

OTTO KELSEY.” 


Q. Did you receive any reply to that? -A. I did. 

Q. What is the date of the reply to that? A. September 22nd. 

Q. Head the reply ? A.: 

“ New York, September 22d, 1906. 
Hon. Otto Kelsey, Superintendent of Insurance, Albany, N . Y.: 

My dear Sir: I beg to acknowledge receipt of yonr letter on 
the 20th instant enclosing copy of approved form of statement as 
completed for the use of the Hew York Life and the Mutual Life 
Insurance Companies in the election of directors, and thanking 
you for the courtesy, I am, 

Very truly yours, 

CHARLES E. HUGHES.” 


Q. Did you receive any criticism from Governor Hughes with 
respect to the form of the statement which you used ? A. I 
did not. 

Q. Was that the only communication you received from him on 
the subject? A. Yes. 

Mr. Hatch.— I desire to have that marked in evidence. 

(Marked Exhibit 94.) 

Q. I show you two papers, Mr. Kelsey; what are they? A. 
The first one is a telegram from Mr. Samuel Untermeyer, dated 
Hew York, July 18, 1906. 

Q. Will you read that telegram, please? A. -- 




278 


Senate Judiciary Committee. 


“ Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

On behalf of the International Committee and the members 
concerned, I protest against filing of any certificate of nominations 
of candidates constituting administration ticket which contains 
the names of Judge George Gray, General Tracy, Col. Shook or 
Mr. Higginbotham, all members of our Committee; these gentle¬ 
men were not consulted and will of course refuse to act. It was 
well known from the vigorous public address signed and issued 
by them on July ninth that they are hostile to administration 
ticket, and advised policy-holders to defeat any and every can¬ 
didate nominated by present management because he was such 
nominee dictated by them, and that they’ joined movement to 
prevent re-election of the old directors with whom they are now 
asked to serve or any directors named by them. Its obvious pur¬ 
pose it is to confuse and deceive policy-holders into belief that they 
are voting our Committee ticket. When they see these names on 
their ballot, the unauthorized use of the names of these distin¬ 
guishable gentlemen, without their knowledge, constitute an 
evasion of the law and a gross breach of propriety as to which they 
may possibly have something to say at proper time. We ask that 
company be compelled to remove these names from ticket before 
it is filed. 

SAMUEL UNTERM YER” 

Q. Hid you reply to that ? A. I did. 

Q. What was their reply ? A. On the same day I sent this 
telegram, dated Albany, July 18, 1906: 

“Albany, July 18, 1906. 

To Samuel Untermeyer, 30 Broad Street, New York: 

Your telegram of eighteenth instant protesting against filing of 
certificate of nomination of candidates for trustees by the Mutual 
Life Insurance Company containing names of members of Inter¬ 
national Policy-holders’ Committee is received. The certificate 
in question was duly filed July seventeenth and a duplicate thereof 
with affidavit attached at nine a. m. this day. This Department 
is not believed to have power to remove such record from its files 
nor to compel an amendment thereto nor to interpose in anv 
manner except under direction of the courts. 

OTTO KELSEY, 

Superintendent of Insurance. 

Charge Insurance Department.” 



Testimony of Mr. Kelsey. 


279 


Mr. Hatch.— I ask to have that marked evidence. 

(Marked Exhibit 95.) 

Q. I show you a printed volume; what is that ? A. These are 
the papers on appeal in the Supreme Court for an order denying 
the application for a temporary writ of mandamus. The title of 
the case is the People of the State of Hew York on relation of 
Alfred M. Shook against Otto Kelsey, Superintendent of Insur¬ 
ance, impleaded with the Mutual Life Insurance Company and 
others, respondents. 

Q. What did that seek to accomplish? A. To require me to 
remove the names from the list of candidates filed by the Mutual 
Company. 

Q. And are they the same names which appear in the telegram 
which you just read from Mr. Untermyer ? A. They are. 

Q. What did you do when the mandamus was served upon you ? 
A. Turned it over to the Attornev-General. 

Q. And he appeared in the matter? A. Yes, and the Judge 
sustained me. 

Q. What Judge was it before at Special Term? A. Judge 
Howard, I think. 4 

Q. And he sustained you ? A. He did, or rather he sustained 

our contention. 

Q. And then what was done with it ? A. I think it was ap¬ 
pealed to the Appellate Division. 

Q. In this Department? A. Yes. 

Q. With what result ? A. It was affirmed. 

Mr. Hatch.— I ask to have that marked in evidence. 

(Marked Exhibit 96.) 

Mr. Hatch.— I offer the opinion delivered by the court in that 
case of the People ex rel. Alfred M. Shook. It appears in 114 
H. Y. Appellate Division at page 888. The opinion is brief and 
is as follows: 

“ Per Curiam: Chapter 326 of the Laws of 1906 required the 
board of directors or trustees of the company to nominate candi¬ 
dates for every vacancy at least five months before the election, 
which is fixed for December 18th, and file a certificate of the 
same in the office of the Superintendent of Insurance, at its home 
office and at the office of every general agency of the company, 
and requires the company at least two months prior to the election 
to mail to each policy-holder a statement of the candidates so 



/' 


280 Senate Judiciary Committee. 

nominated by it and by any policy-holders as permitted by the 
statute. This statement of nominations, forms of proxies and 
certain instructions, with a return gummed envelope, are to be 
mailed to each such policy-holder. The statute provides that the 
inclosures so mailed shall be approved by the Superintendent of 
Insurance before being mailed. This does not recognize any au¬ 
thority in him to change the nominations, or authorize him to 
make any different statement of the nominees from the ones filed. 
Chapter 354 of the Laws of 1906 provides that the election shall 
be under the supervision of the Superintendent of Insurance. 
This does not purport to give -him any authority to change the 
nominations as made. There is no provision made in the statute 
for changing a nomination after it is made, except in case of the 
death or incapacity of a nominee. 

In the matter of Dental Society v. Jacobs (103 App. Div. 86) 
it was held by this court that a public officer cannot by mandamus 
be compelled to change a record in his office except in cases where 
it is expressly authorized by statute. 

This court cannot, therefore, compel the Superintendent of 
Insurance to change the record of nominations filed with him. 
Neither can it require the company to send a different statement 
of nominations to the policy-holders from that required by the 
statute. 

The order appealed from is, therefore, affirmed, with costs. 

All concurred.” 

Mr. Hatch.— I will have that marked in evidence. 

(Marked Exhibit 97.) 

Mr, Mayer.— That, for the convenience of the Committee I 
may say came up on appeal from the order of Mr. Justice Howard, 
at Special Term, entered on the 20th of August, 1906, denying 
the motion of the relator for a temporary writ of mandamus; and 
this decision was rendered in the month of August, the Appellate 
Division taking the matter up as a matter of convenience at the 
same time that it took up the question of the apportionment cases. 

Mr. Hatch (resuming) : 

Q. That is 1906? A. Yes, sir. 

Q. Mr. Kelsey, in addition to the statement which you con¬ 
sidered in the argument which you heard in New York, did yon 
have any interview with the counsel in the city of New York with 
respect to this matter ? A. This matter of the ballot ? 


/ 








Testimony of Mr. Kelsey. 


281 


Q. Yes. A. I did. 

Q. Do you know on what date and with whom you had them? 
A. I could not recall them offhand. 

Q. Have you any memorandum of that in any diary you keep ? 
A. Yes. 

Q. Can you tell us what dates you had conferences by referring 
to any memorandum you have? A. I can. 

Q. Will you give to the Committee who, generally, they were 
with and with reference to what matter? A. Judge, these are 
not all of them; these are some I had when I went to New York 
in order to be sure to appear. 

Q. That is, you made arrangements here for your engagements 
in New York? A. Yes. 

Q. Did you follow these, engagements ? A. Yes, sir. 

Q. State the nature of them, who attended before you .and upon 
what subject? A. I cannot state fully. 

Q. State as fully as you are able to? A. June 2d there was a 
conference with the Attorney-General and the deputy attorney, 
Mr. Graham, at the Bar Association. 

Q. Do you recollect the subject matter of that conference? 
A. It was in relation to elections, hut I cannot tell whether it was 
the ballots or some other point. 

Q. But it was upon that general subject matter? A. It was. 

Q. Now the next — you said that was at the Bar Association — 
New York City? A. Yes, sir. 

Q. Go on. A. Do you wish matters outside of the ballot and 
the election matter ? 

Q. Confine yourself to the election matter now that we have 
been upon that subject? A. July 6th, conference with Mr. Unter- 
meyer at the New York office. September 15 — 

Q. One moment. . I show you a letter Mr. Kelsey, you may 
examine it and see if that refreshes your recollections. A. It 
does not identify the place. There were conferences, some held 
in New York and some in Albany. 

Q. Are you able to state the number you had in New York? 
A. September 15th; the only other I think is in December, the 
12th, 14th, 15th and 16th, and all were in relation to the election. 

Q. That relates to the election? A. Yes. 

Q. And do you recollect with whom you had interviews there 
aside from the Attorney-General at the Bar Association ? A. I 
remember Mr. Kntermeyer twice and Mr. Scrugham twice at the 
New York office. I met Mr. McIntosh two or three times. 




V 


282 Senate Judiciary Committee. 

Q. Who is Mr. McIntosh ? A. He is the general solicitor of 
the Hew York Life, and he was up here repeatedly. Judge 
McKeen, I met him in Hew York and in Albany many times. 
He is the general counsel of the Mutual. 

Q. And he was one of the counsel to the Armstrong Committee ? 
A. Yes. 

Q. Well, state generally, Mr. Kelsey, did you have few or many 
interviews with these people in the city of Hew York upon this 
subject? A. I had several. I think the larger number were held 
in Albany. 

Q. But the interviews in Albany and Hew York covered a large 
number? A. They did. 

Q. I show you a record, Mr. Kelsey: What is that? A. It is 
a record of an action in the Supreme Court of Hew York county, 
Stephen Farrelly suing in his own behalf and on behalf of all the 
other policy-holders of the Hew York Life Insurance Company 
as plaintiff against the Hew York Life Insurance Company, de¬ 
fendant. It is the pleadings and the evidence in support of and 
in opposition to plaintiff’s application for an injunction. 

Q. Enjoining what? A. Enjoining the company from employ¬ 
ing its agents and officers in certain directions, and from expend¬ 
ing its money in improperly campaigning for the administration 
ticket. It follows the same line of complaints in evidence here 
which were made to me by the Committee and are in a bundle 
of papers which you have in evidence. 

Q. And embraces charges to which your attention has been 
called ? A. Covers precisely the same ground. 

Q. Do you know the history of that litigation? A. I know 
the results. 

Q. What was the result ? A. The application for a temporary 
injunction was denied. 

Mr. Hatch.— I desire to have that marked in evidence. 

(Marked Exhibit 98.) 

Mr. Hatch.— The court there passes on the same questions 
which were passed upon by the Superintendent. 

Mr. Mayer.— I desire to offer the opinion of the court in evi¬ 
dence for the purpose of showing the court’s view. 

(Marked Exhibit 99.) 

Mr. Hatch (resuming) : 

Q. In any ruling, Mr, Kelsey, which you made which was 


< 


Farrelly v. Hew York Life Ins. Co. 283 

reviewed by the court was there any in which your action was 
reversed? A. Yone. 

Q. And so far as your rulings were examined by the court 
your rulings were sustained ? A. ‘Yes, sir. 

Mr. Hatch.— I will ask Judge Mayer to read Exhibit 99 to 
the Committee. 

Mr. Mayer.— This is the opinion of the court: 

Exhibit Ho. 99: 

HEW YORK SUPREME COURT. 

Special Term, Part 1. 

Stephen Farrelly, Suing in His Own Behalf, etc., 

against 

Tiie Hew York Life Insurance Co., et al . 

Samuel Untermyer, Esq., for plaintiff. 

James H. McIntosh, Esq., and William Helson Cromwell, 
Esq., for defendants Hew York Life Insurance Company and 
Mr. Oit. 

Dowling, J.— Plaintiff seeks an injunction pendente lite 
restraining the defendants and all persons acting for or under 
them or by their direction (1) from proceeding with or carrying 
on the compaign described in the complaint for the election of the 
Administration ticket at the expense of the defendant corpora¬ 
tion; (2) from expending or causing or permitting to be expended 
any sums of money whatever in distributing the marked ballots 
referred to in the complaint or procuring the execution thereof; 
(3) from using or employing the time of any employees of the 
defendant corporation for any of the purposes aforesaid or other¬ 
wise than in the lawful and proper business of the company; (4) 
from attempting or seeking to procure the execution of, and from 
circulating by mail or otherwise, any of the aforesaid marked 
ballots containing policy numbers, and (5) from attempting or 
seeking by any other means than sending to the policy-holders 
the statement of nominations, proxy and envelope prescribed by 
statute to obtain the ballots or proxies of any of said policy-hold¬ 
ers. Plaintiff is a policy-holder of the defendant corporation, the 
Hew York Life Insurance company, and brings this action on 





284 


Senate Judiciary Committee. 


his own behalf and in behalf of all other policy-holders of said 
company, to obtain permanent relief substantially identical with 
that asked for 'pendente lite, together with an accounting for any 
of the defendant corporation’s funds diverted, wasted or mis¬ 
appropriated in the manner alleged. Pursuant to the provisions 
of section 30, chapter 326, p. 787, Laws of 1906, an election for 
directors of the defendant corporation will be held on December 
18, 1906, the ballots have been distributed therefor, and, as pro¬ 
vided for by said law, ballots and proxies for said election have 
been executed and forwarded since October 18, the date set for 
the commencement of such voting. 

At this election plaintiff is a candidate for election as a director 
upon the International Committee ticket. This ticket is nomi¬ 
nated in opposition to that which is known a“s the Administration 
ticket, and which, bv the provisions of said law, the present board 
of directors of the defendant corporation is required to name. As 
votes and proxies have been received continually since October 
18, and are still being received, and as the date for the declaration 
of the result of the voting is near at hand the intervention of the 
court is sought to prevent a continuance of what are alleged to 
be unlawful methods of campaigning in behalf of the Adminis¬ 
tration ticket, summarized in the plaintiff’s prayer for relief. 
The propositions of law governing the granting of the relief 
sought are well settled. The sole purpose of an injunction 
pendente lite is to prevent the defendant, during the pendency 
of the action, from committing, or continuing to commit, an act 
which would impair or render ineffectual any judgment that the 
plaintiff might obtain; and, unless the court can see from the 
papers presented that some injury may result to the plaintiff un¬ 
less the injunction be granted, the application for it will always 
be denied. This rule was clearly stated by Allen, J., in People 
v. Canal Board (55 17. Y. 390). He said: “ To entitle a plain¬ 
tiff to prohibition by injunction by a court of equity, either pro¬ 
visional or perpetual, he must not only show a clear legal and 
equitable right to the relief demanded, or to some part of it, and 
to which the injunction is essential, but also that some act is 
being done by the defendant, or is threatened and imminent, 
which will be destructive of such right or cause material injury 
to him.” In short, to justify the granting of the motion for a 
temporary injunction, the plaintiff must establish that the defend¬ 
ant unless restrained, will do some act during the pendency of the 


Earrelly v . New York Life Ins. Co. 285 

action, wliicli will produce injury to the plaintiff, or that he 
threatens to do some act in violation of the plaintiff’s right inci¬ 
dent to or connected with the subject-matter of the action. (Clark 
v. Herbert, Booth, King & Bro. Pub. Co., 40 App. Div. 408, 57 
N. Y. Supp. 975.) It may be said at the outset that the allega¬ 
tions of the complaint are all directly and flatly controverted by 
the answer herein. Taking up seriatim the alleged acts against 
which a temporary injunction is asked, the first three are that a 
compaign is being conducted at the expense of the defendant cor¬ 
poration for the election of the Administration ticket; that the 
money of the company is being spent in the distribution of 
marked ballots, circulars and other literature, and that the time 
of the employees of the company is being used in behalf of the 
so-called Administration campaign. Plaintiff has been unable to 
substantiate these charges by proof. The allegations of his com¬ 
plaint are in large part made on information and belief, and 
entirely so as to the charges of improper conduct on the part of 
defendant corporation. Many of the statements in his affidavit 
and that of his supporting affidavits, while in form of statements 
of fact, are in reality only statements of his conclusions, surmises 
or opinions. In his affidavit, plaintiff says: “ In view of the fact 
that the defendant corporation has upward of 800,000 policy¬ 
holders, a large portion of whom are residents of the United 
States and Canada, it is impossible to believe that agents of the 
company are carrying on a campaign at their own expense or 
otherwise than at the expense of the company.” Yet no evidence 
is adduced by him, or on his behalf, that the company has spent 
any of its funds in this so-called campaign. On the contrary, it 
affirmatively appears that the defendant corporation has opened 
in its books a special account for the expenses incurred in com¬ 
plying with the law governing this election, which is the first one 
held by this company under the law of 1906. A statement in 
full of the items appearing in said account has been made by the 
Comptroller, with the date and purpose of every payment, No¬ 
where in said statement is there an item which could be properly 
termed an expense for campaigning, nor for assisting in the 
success of the Administration ticket. Large numbers of circulars 
have been introduced in evidence as exhibits which were sent out 
in various States to policy-holders by agents of the defendant 
company, soliciting votes for the Administration ticket, and en¬ 
closing what is called by plaintiff a “ marked ballot”; which 


286 


Senate Judiciary Committee. 


means a ballot prepared for voting in favor of the Administration 
ticket. It is affirmatively established that, so far from being 
sent out at the expense of the company, those circulars are being 
sent out by agents on their own initiative - and at their own 
expense. Plaintiff charges on information and belief that these 
circulars were printed at the home office of the defendant com¬ 
pany, but this is disproved by the affidavit of Van Wart, in charge 
of its printing office, showing that not one of the circulars com¬ 
plained of was printed therein. 

Furthermore, it was established from the affidavits submitted 
that neither the moneys of the defendant company nor the time 
of its employees during business hours has been devoted in any 
manner, shape or form to the election of the Administration 
ticket, nor to the distribution of so-called “ marked ballots ” in 
aid thereof, nor to the solicitation of votes or proxies for the 
said ticket, nor have advances to agents been made to induce their 
activity therefor. This is overwhelmingly demonstrated by the 
affidavits of six executive officers of the defendant company, of 
twenty-four heads of departments thereof, of two inspectors of 
agencies, of five agency directors, of thirty-two cashiers, and oi 
eiglity-six soliciting agents located in some ten different states. 
Plaintiff does not claim that the defendant company’s employees 
may not use their efforts for whatever ticket they think best were 
calculated to promote the company’s interests so long as such 
activity is had outside of their hours of employment and without 
expenditure of the company’s moneys. So far as the fourth series 
of acts complained of, being the circulation of so-called “ marked 
ballots ” with the policy-holders’ number written in, is concerned, 
there is no proof whatever connecting the specific cases enumer¬ 
ated with the defendant corporation, and it affirmatively appears 
that the number upon a policy of insurance is not confidential 
and reserved to the home office and the policy-holder, but is 
known and in the nature of the transaction must be known • to 
the agents through whose hands the application and policy pass. 
Finally I have examined carefully the complaint and affidavits 
to see if any ground existed for the fifth class of acts complained 
of for any relief pendente lite under the general prayer, and I 
am unable to discover satisfactory proof of any act, attempted 
or threatened upon the part of the defendant corporation which 
would entitle plaintiff to a temporary injunction. 

The motion is, therefore, denied. 


Testimony of Me. Kelsey. 


287 


Mr. Mayer. For tlie convenience of the Committee we have 
selected a few paragraphs from this record; not many. The 
record is the motion for a preliminary injunction pending a litiga¬ 
tion. 

The action having been brought and the motion having been 
made on behalf of the International Policvholders’ Com- 
niittee through the plaintiff Farrelly, the matter was brought on. 
The record on this motion comprises 8,846 pages, that being the 
record on the motion solely; and the moving papers, as has been 
stated, and I will state it again for clearness, that they embody 
practically all the complaints made to the Superintendent against 
the New York Life by the International Policyholders’ Organ¬ 
ization, which have already been offered in evidence. 

The prayer upon this motion is as follows: 

“ Wherefore, the plaintiff prays that a decree may be made as 
follows: 

“ 1. Permanently and perpetually restraining the defendant 
corporation, its officers, directors, committees, agency directors, 
agents, attorneys and servants and each and every one of them 
and all persons employed by said defendants or any of them, from 
proceeding with or carrying on the aforesaid campaign for the 
election of said Administration ticket at the expense of said 
defendant corporation, and from expending or causing or per¬ 
mitting to be expended any sums of money whatever in distribut¬ 
ing the aforesaid marked ballots or procuring the execution 
thereof, and from using or emjffoying the time of any employees 
of said defendant corporation for any of the purposes aforesaid 
or otherwise than in the lawful and proper business of the com¬ 
pany, and from attempting or seeking to procure the execution 
of and from circulating by mail or otherwise any of the aforesaid 
marked ballots containing policy numbers, and from attempting 
or seeking by any other means than sending to the policy-holders 
the statement of nominations, proxy and envelope prescribed 
by statute to obtain the ballots or proxies of any of said policy¬ 
holders; and commanding and strictly enjoining the defendants 
and each and every of the aforesaid persons absolutely to desist 
and refrain from each and every of the matters and things afore¬ 
said. 

“ 2. Compelling the individual defendants to discover and ac¬ 
count for and pay over to the defendant corporation all sums of 
money and the value of all property and of the time of the de- 


288 


Senate Judiciary Committee. 


fendant corporation employees diverted and wasted and misap- 
priated as aforesaid, and for such other or further relief in the 
premises as may be agreeable to equity, besides the costs of this 
action. 

“ 3. And the plaintiff further prays that an order may he made 
restraining the defendant corporation, its officers, directors, com¬ 
mittees, agency directors, agents, attorneys and servants and the 
individual defendants during the pendency of this action from 
permitting any of the grievances hereinbefore specified.” 

In support of that affidavits are submitted, and there are 
twenty-five allegations of alleged wrongdoing, some of them being 
as follows: 

The Eighth Allegation reads: 

“ Eighth.— Eor a considerable time past the defendants have 
been engaged in and still are carrying on at the expense of the 
policy-holders of the defendant corporation an extensive and 
costly campaign -for the election of the Administration Ticket, 
and are carrying on the same by availing themselves of and 
spreading broadcast among the defendant corporation’s agents, 
as hereinafter set forth, confidential information existing in the 
records and archives of the company, all of which is a gross 
breach of the duty of the defendants towards the policy-holders 
of the company, and by means of misleading and mutilated bal¬ 
lots circulated among the policy-holders by agents of the defendant 
corporation; and the defendants have been and are attempting to 
coerce policy-holders into voting the Administration Ticket by 
requesting such policy-holders to report to various persons desig¬ 
nated by the defendants or by agents of the company, whether 
such policy-holders have voted the Administration Ticket.” 

The Chairman.— Is that the Court of Appeals record? 

Mr. Mayer.— No, it is a motion at Special Term; but there 
are 845 printed pages of it, which indicates the bitterness of the 
controversy. The case never went to Appellate Division. 

The Hinth Allegation is: " 

u The defendant corporation has in its employ several hundred 
persons known as agency directors scattered throughout the United 
States, Canada, Great Britain, the continent of Europe and other 
parts of the civilized world. A large number of said agency 
directors are resident within the United States. Said agency 
directors are employed by the defendant corporation for the car¬ 
rying on of its business and each of them employs a large number 


Testimony of Me. Iyelsey. 


i 


289 


of agents to solicit new insurance. Several thousand of such 
agents are employed in the United States and large numbers m 
other countries. Said agency directors and agents receive no 
stated salary from the defendant corporation but are paid com* 
missions based upon premiums on policies written by them, and 
m advance of the earning of such commissions it has long been the 
practice of.the defendant corporation to lend large sums of money, 
termed “ advances,” to its agency directors, who in turn make 
similar advances to the agents employed by them as aforesaid. 
All of the agency directors of the defendant corporation are con¬ 
tinuously and in large sums indebted to the company for such 
advances and the same is true upon a similar scale of the agents 
employed by such agency directors. The defendant corporation 
maintains large offices known as the “ Home Office,” in the 
borough of Manhattan, city of Xew York, in the county aforesaid, 
and employs therein an extensive staff of salaried employees such 
as bookkeepers, clerks of various grades, stenographers, typewrit¬ 
ers and copyists.” 

The Eleventh Allegation is: 

” Idle plaintiff further alleges upon information and belief that 
prior to October 15th, 1900, the individual defendants in viola¬ 
tion of their duties as directors of the defendant corporation 
caused to be prepared and printed to the number of upwards of 
eight hundred thousand ballots in all respects similar to the afore¬ 
said official ballot of statement of nominations and return en¬ 
velopes, and caused such ballots and return envelopes to be sent 
to the company’s aforesaid agency directors several days prior to 
October 18, 1906, with instructions to place upon each ballot the 
number of a policy held by one of the company’s policy-holders, 
and to mark each ballot by obliterating the names of the candi¬ 
dates upon the International Committee Ticket; the work of 
marking and placing said numbers upon said ballots, and in some 
instances upon the return envelopes to be done by the office force 
and salaried employees of said agency directors, and with instruc¬ 
tions to the latter, after such preparation of said ballots and en¬ 
velopes, to distribute the same among the agents employed by said 
agency directors respectively, and to direct such agents to go 
among all the policy-holders of the company residing within the 
territory allotted to such agency directors and procure and in¬ 
duce, if possible, the execution of said mutilated ballots by said 
policy-holders in advance of the receipt by said policy-holders of 

19 


290 


* Senate Judiciary Committee. 


the official ballot prescribed by statute and mailed by the defend¬ 
ant corporation on October 17 and 18, 1900. Each of such 
marked ballots when properly executed by a policy-holder will — 
constitute a vote for the Administration Ticket. The printing of 
said ballots and envelopes and of much of the other printed matter 
hereinafter referred to was done by the defendant corporation at 
its printing establishment in the city of Hew York. Each of such 
return envelopes when sent out from the home office bore a two- 
cent postage stamp placed lengthwise of the envelope, for the 
purpose of indicating to the officers of the defendant corporation 
when such envelopes should be received by the company, that 
they contained votes for the Administration Ticket, and to dis¬ 
tinguish them from the official return envelopes which might be 
received by the company from policy-holders whose attitude 
towards the Administration Ticket was unknown.” 

The Thirteenth Allegation is: 

“ The plaintiff further alleges upon information and belief that 
the entire expense of the preparation, printing and despatch of 
said marked ballots and return envelopes, together with the post¬ 
age thereon, has been paid by the defendant corporation, involv¬ 
ing an expenditure of many thousands of dollars and constituting 
a waste and unlawful diversion of the funds of the defendant cor¬ 
poration and of the policy-holders.” 

The Sixteenth Allegation is: 

“ The plaintiff further alleges upon information and belief that 
in addition to personal solicitation of policy-holders of the defend¬ 
ant corporation, carried on as aforesaid, the company’s agency 
directors and agents have been and are under the direction of 
the defendant corporation and of the individual defendants, carry¬ 
ing on, at least throughout the United States and Canada, an 
extensive campaign in favor of thendection of the Administration 
Ticket by mailing ta each policy-holder of the company one of 
the aforesaid marked ballots containing the number of his policy 
and a return envelope like that prescribed for in the return of 
the official ballot; such envelopes in some instances also bearing 
the number of the policy, and with such ballot and envelope a 
circular letter bearing the imprint, “Agent, Hew York Life In¬ 
surance Company,” and signed by one of such agents, commend¬ 
ing the Administration Ticket and reflecting upon the Interna¬ 
tional Committee Ticket, and urging the policy-holders to vote the 
Administration I icket. Each of such letters concludes as follows: 


Testimony of Mb. Kelsey. 


291 


e I am sending you this letter and the enclosure of my own ac¬ 
cord and with out expense to the company directly or indirectly,'* 
each of such letters bearing the names of prominent policy¬ 
holders of the company, recommending to policy-holders the elec¬ 
tion of the Administration Ticket, and similar literature of various 
sorts, are enclosed with the agent’s letter. All of the aforesaid, to- 
wit, ballot, stamped return envelope, agent’s letter and accompany¬ 
ing literature are enclosed in an envelope addressed to the policy¬ 
holder, bearing the following imprint: 

‘ If not delivered within five days return to P. O. Box 192, 
New York City.’ 

which is a postoffice box rented by or for the benefit of the defend¬ 
ant corporation.” 

The Eighteenth Allegation is: 

“ The plaintiff further alleges upon information and belief that 
policy-holders of the defendant corporation who hold more than 
one policy therein are receiving as many of the aforesaid marked 
ballots as they hold policies with the same urgent request to vote 
the Administration Ticket accompanying each ballot, thus tending 
to induce such policy-holder to cast a ballot for each policy held 
by him although the statute gives each policy-holder only one 
vote without regard to the number of policies carried'by him.” 

The Nineteenth Allegation is: 

“ The plaintiff alleges upon information and belief that in 
many instances the aforesaid ballots and literature sent to policy¬ 
holders are accompanied by a return postal card addressed to some 
person of prominence in the community in which the policy-holder 
resides, containing a report to the effect that the policy-holder re¬ 
ports thereon that he has voted the Administration Ticket, and con¬ 
taining also the number of the policy; and such policy-holders are 
requested to mail such postal cards containing such report. Sai l 
requested reports are calculated and are intended by the defend¬ 
ants to coerce policy-holders to vote the Administration Ticket.” 

Mr. Hatch.— In connection with the Farrellv case already in¬ 
troduced in evidence and these questions which arose under section 
94 of the Insurance Law, I desire to read from the preliminary 
report of the Superintendent which ha? been presented to this 
present Legislature and which has been received heretofore in 
evidence, that which relates to his recommendations in relation to 
this section. 

I offer that for the purpose of showing evidence of possession 

of initiative. 



292 


Senate Judiciary Committee. 


Mr. Hatch ( resuming) : 

\ o / ( 

Q. Mr. Kelsey, I show you a bundle of papers. TV hat are those 
papers ? A. They are letters received from policy-holders in rela¬ 
tion to the election. 

Q. To the policy-holders’ committee? A. I think they are from 
the policy-holders. The first ones seem to be. 

Mr. Hatch.— I desire to offer this in evidence and to read a 
summary statement of what they show. Judge Mayer will read 
it. 


Mr. Mayer.— This is an abstract or summary of the correspond¬ 
ence with the Superintendent of Insurance coming from the Inter¬ 
national Committee. 

Senator Gradv.— Involving 1 how many cases, Judge? 


Mr. Mayer.— This little thing involves seventy different 

t, O 


in¬ 


quiries. 

94—13-1. In re Samuel Untermver. 

94-B-2. Relating to arrangements for facilitating copying the 
lists of policy-holders. 

94—B-3. Relating to facilities to be extended to the United 
States Addressing and Printing Company. 

94-B-4. Relating to credential for copyists of lists of policy- 
holders. 

94—B-5. Relating to the authorization which will be required 
for copyists. 

94—B-6. Relating to arrangements to be made for copying lists 
of policy-holders. 

94—B-7. Relating to forms of authority to copy lists of policy¬ 
holders. 

94—B-8. Complaint of Samuel Untermyer; relating to incom¬ 
plete lists. 

94-B-9. Samuel Untermyer in re People ex rel. Shook y. 
Kelsey. 

94-B-10. Relating to circularization of news clipping by Hew 
York Life Insurance Company. 

94-B-ll. Relating to an alleged stencil list of the names and 
addresses of Mutual Life policy-holders. 

94—B-12. In relation to list of names selected as Administration 
Ticket. 

94-B-I3. Relating to forms of statements tickets, proxies, etc. 

94-B-14. Relating to forms, ballots, etc. 








Testimony of Mk. Kelsey. 


293 


94-B-15. In relation to petition alleged to be circulated from 
an agency in Montana. 

94—B-16. Making an engagement to discuss questions arising 
with respect to form of ballots. 

94—B-17. Relating to charge made against T. C. Bell and John 
R. Christie. 

94—B-18. In relation to matter of Henry S. Morgan. 

94—B-19. Making appointment to consider statement to policy¬ 
holders. 

94—B-20. Making appointment to consider statement to policy- 
holders. 


94—B-21. Relating to the charge that agents of the New York 
Life are canvassing policy-holders. 

94—B-22. Relating to protest against agents of the Yew York 
Life and Mutual Life Insurance Companies. 

94-B-23. Relating to protest made by G. R. Scrugham against 
Yew York Life. 

94—B-24. In relation to complaint made by Mr. Untermyer 
and Mr. Scrugham in regard to agents of Mutual Life. 

94-B-25. In relation to agents of Yew York Life obtaining un¬ 
dated proxies. 

94—B-20. Enclosing copy of nomination blank from Interna¬ 
tional Policy-holders’ Committee. 

t, 

94—B-27. Enclosing a proof sheet of form of statement. 

94—B-28. Relating to matter of Angus Almond. 

94—B-29. Relating to care and protection of ballots which may 

be voted bv mail. 

€/ 


94—B-30. Relating to the name of William II. Gratwick on the 
United Committees Ticket. 

94—B-31. Relating to the names William II. Gratwick and 

O 




James Yicolls. 

94—B-32. Protest against the names of Charles E. Hughes. 

94-B-33. Relating to correction of addresses on United Com- 
rnittees Ticket. 

94—B-34. Relating to charge against the Mutual Life Insurance 
Company of sending out ballots printed in single ticket. 

94-B-35. In relation to protest of Yew York Life Insurance 
Company against action to have hem taUn by International Pol¬ 
icy-holders’ Committee. 

V 

94-B-30. Relating to charges made against J. J. Parker. 


294 


Senate Judiciary Committee. 


94—B-37. Enclosing copy of statement, return envelope, and 
coin envelope sent out by the International Policy-holders’ Com¬ 
mittee. 

94-B-38. Relating to the alleged practice of agents in Yew 
York Life in placing number of policy on statement. 

94-B-39. Relating to official statements of the Yew York Life 
mailed to policy-holders in cities of Yew Orleans, Dallas, San 
Antonio, Denver, Kansas City, and elsewhere. 

94-B-40. Relating to provisions for the receipt and canvass of 
ballots. 

94-B-41. Relating to copying lists of policy-holders in foreign 
countries, and “ official statements ” mailed in such countries. 

94-B-42. Relating to the use of stencils owned by Mutual Life. 

94-B-43. Relating to ballot sent by mail by Yew York Life 
and Mutual Life Insurance Companies. 

94—B-44. Giving address of Mr. George R. Scrugham. 

91—B-45. Relating to the number of mailed ballots received by 
the Mutual and Yew York Life Insurance Companies, and also a 
complaint in the matter of McClave. 

94-B-4(T. In the matter of G. B. Smith, Philadelphia. 

94—B-47. Relating to agents in Yew York Life sending out 
separate ballots. 

94-B-48. Giving address of George R. Scrugham. 

94—B-49. Relating to a list‘of names of the policy-holders whose 
votes have been received by the Yew Yprk Life and Mutual Life 
Insurance Companies. 

94—B-50. Relating to newspaper clipping and circular letter 
from Randall Whittier, of Louisville, Kentucky. 

94—B-51. Relating to transmitting mail from the general post- 
office to the home offices of the Yew York Life and Mutual Life 
Insurance Comp an i es. 

94-B-52. Relating to the complaint against Mr. Albert Mc¬ 
Clave. 

w 

94—B-53. Relating to the complaint of Yew York Life making 
advances to agents. 

94-B-54. Relating to charges made against the Mutual Life In¬ 
surance Company of making advances to agents. 

94-B-55. Relating to the ballot of Jesse Y. Welty, of Chicamv 

94-B-56. Relating to request for lists of ballots received bv 
Yew York Life. 




Testimony of Mr. Kelsey. 


295 


94—13-57. In relation to the matter of readdressed return mail 
received by the International Policy-holder s’ Committee. 

94-B-58. In relation to a list of ballots received by the Hew 
York Life Insurance Company. 

94-B-59. I n relation to the matter of readdressing letters re- 

o 

turned through the mails by reason of defective addresses. 

94-B-60. in relation to the appointment of inspectors of elec¬ 
tion. 

94—B-61. In relation to list of ballots received bv Hew York 

Life. 


94-B-62. In relation to conduct of Mr. T. Howard Lewis. 

94-B-63. In relation to request that the Mutual Life be asked 
to correct addresses of policy-holders. 

94-B-64. Relating to forms of ballot mailed by International 
Policy-holders’ Committee. 

tv **■ 

94-B-65. Enclosing copy of letter from Superintendent to Gen¬ 
eral Solicitor - of the Mutual Life, containing his views as to 
voting by proxy. 

94-B—66. Relating to letter of Superintendent containing his 
views as to voting by proxy. 

94-B-67. Relating^ to certain alleged wrongful acts by repre¬ 
sentatives of the New York Life Insurance Company. 

94-B-68. Making an appointment for meeting in Hew' York 
City. 

tv • 

94-B-69. Relating to addition of blank forms of official state¬ 
ment transmitted to Detroit. 

94-B-70. Relating to counting of the votes at the offices of Hew 
York and Mutual Life Insurance Companies. 


Senator McCarren.— Judge, is it intended by the manner in 
which the Superintendent disposed of all these communications 
and treated them, is it intended to demonstrate his executive 
ability and fitness ? 

Mr. Hatch.— Yes, sir; his capacity and initiative in discharg¬ 
ing the duties of his office. As I understand, that is a part of the 
charge contained in the message of the Governor. 

Mr. Ainsworth.— And it is also necessary to illustrate the ex- 
traordinary work of the office, because up to this point we have not 
offered anything in evidence as to the regular ordinary routine. 

Mr. McCarren.— There is no misunderstanding about- that. 





Senate Judiciary Committee. 


Of 


)() 


By Mr. Hatch: 

(■'. I show yon another bundle of papers: What are they ? A. 
It is correspondence relating to the list of policy-holders of the 
Xe.v York Life Company. 

Q. Do you know how many there are of them? A. Yes. 

Q. How many varieties are there ? A. 57. 

Mr. Hatch.— I offer that in evidence. 

(Marked Exhibit 101.) 

Mr. Mayer.— Here is another abstract, prepared by counsel, 
relating solely to the inquiries of the Hew Y r ork Life Insurance 
Company in regard almost entirely to the question of the lists. 

94-1. Relating to list of foreign policy-holders. 

94-2. Relating to space required by Hew York Life lists of 
policy-holders. 

94-3. Relating to filing lists of policy-holders. 

94-4. Relating to copying lists of policy-holders on file. 

94-5. Asking for statement of volumes containing lists of policy¬ 
holders of the Hew York Life. , 

94-6. Certificate names of candidates for trustees Hew York 


Life. 

9 1-7 
Life. 


Certificate containing list of 


general agencies Hew York 


94-8. Statement of number of volumes containing lists of policy¬ 
holders. 

94-9. Relating to furnishing lists of policy-holders to Inter¬ 
national Policy-holders’ Committee. 

94-10. Relating to furnishing lists of policy-holders to Inter¬ 
national Policy-holders’ Committee. 

91-11. Correction for lists of general agents. 

94-12. Re lating to “forms, ballots, instructions, etc.” 

94-13. In the matter of safeguarding ballots. 

o o 

94-14. Relating to “statement” prepared by International 
Policy-holders’ Committee. 

94-15. Relating to “ form of statement.” 

94-16. Relating to form of “ return envelope ” for ballots. 
94-17. Relating to form of “ statement and instructions.” 

94-18. Relating to “return envelopes” for use in foreign 
countries. 

94-19. Relating to form of envelope for mailing “ statement 

•i- V 

( tc. 



Tfstimoxy of Mu. 


Kelsey. 



i 


04-20. Enclosing copy of personal letter from President On*. 

04-21. Designating the words _ “ International Committee 
ticket for the list of nominations to be presented by that or¬ 
ganization of policy-holders. 

04-22. Relating to the earliest date policy-holders’ mailed vote 
may he received. 

04-23. Revised form of “ statement.” 

04-24. Relating to “ statement, etc.,” f< >r nse in foreign coun¬ 
tries. 

94-25. Form of policy-holders’ policy, as approved. 

04-26. Relating to the time when voting* may begin. 

04-27. Relating to “official statement” for nse in foreign 
countries. 


04-28. Enclosing form of “ statement,” as approved. 

91-20. Relating to new nomination to the office of director. 
04-30. Relating to “ proxies and official statement.” 

04-31. Relating to form of printing the International Ticket in 
the “ official statement.” 

94-32. Calling attention to an erroneous date in “ form of 
statement.” 

04-33. Relating to assignees of policies. 

04-34. Certified list of trustees Yew York Life Insurance Com¬ 


pany. 

^04-35. Relating to “ return envelopes ” for use in foreign 
countries. 

04-36. Relating to custody of ballots. 

04-37. Acknowledging receipt of list of candidates nominated 
for directors by the International Policy-holders’ Committee. 

04-38. Relating to a postal card A Yotiee to Policy-holders of 
the Yew York Life Insurance Company in the matter of the 
pending election of directors.” 

04-30. Relating to “ proxies and official statement ” for use in 
foreign countries. 

04-40. Relating to arrangements for receiving ballots. 

04-41. Relating to “ proxies and official statement ” f for use 
in foreign countries. 

94-42. Relating to safeguarding the ballots. 

94-43. Relating to “ official statement, etc.,” for use in foreign 
countries. 

94-44. Relating to “ official statement, etc.,” for use in foreign 
countries. 


208 Senate Judiciary Committee. 

c- 

94-45. Eclating to “ official statement, etc.,” for use in foreign 
countries. 

94-4G. Eel a ting to voting rights of assignees. 

94-47. Eclating to a company representative to be present dur¬ 
ing the casting of votes for directors. 

94-48. Eelating to inspectors of election. 

94-49. Eelating to voting by proxy. 

94-50. Eelating to form of “ writing, etc.,” necessary to con¬ 
stitute a valid ballot. 

94-5,1. Fotice of conference in relation to election of directors. 

94-52. Eelating to certificate of nomination of Louis F. Dom- 
merich, as director. 

94-53. Eelating to inspectors of election. 

94-54. Fixing compensation of inspectors of election. 

94-55. Fixing compensation of inspectors of election. 

94-56. Fames of inspectors of election and form of appoint¬ 
ment. 

94-57. Eefusal to allow the withdrawal of lists of policy-holders. 

Mr. Mayer.— Fow, as was done the other day I will read a 
typical letter out of the class just abstracted, and this indicates 
the extent and character of the questions involved; and I will 
also read thereafter the answer of the Superintendent thereto: 

November 26, 1906. 

Hon. Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— Few York Life Insurance Company submits to 
you, as Superintendent of Insurance, and as such charged with 
the duty, under chapter 123 of the Laws of 1906, of supervising 
the election of directors of this company to he held at the annual 
meeting of the company on the 18th day of December, 1906; 
the following state of facts which threatens to deceive and dis¬ 
franchise many policy-holders of this company who are entitled 
to vote at said election for directors, to wit: 

First.— Section 94 of the Insurance Law requires the com¬ 
pany, at least two months before the 18th day of December, to 
mail to the policy-holders a statement of the candidates nomi¬ 
nated, a return envelope “ having thereon the name and post- 
office address of the corporation/’ and a proxy form. The law 
further provides as follows: 




Testimony of Mr. Kelsey. 


299 


k ‘A policy-holder desiring to vote by mail must indicate the 
name of the nominee or nominees for whom he desires to vote or 
strike out the name or names of those for whom he does not 
desire to vote upon the statement so provided or must otherwise 
suitably indicate in writing the name of the nominee or nominees 
for whom he desires to vote, and must sign the said statement 
or other writing in his own handwriting in the presence of sub¬ 
scribing witness, and the statement when so marked and signed 
or such other writing when signed shall- become a ballot. Such 
policy-holder must enclose the statement so marked or such other 
writing in such return or a similar envelope upon which must 
be written his signature in his own handwriting and his post- 
office address and the number of at least one policy held by him. 
Such envelope containing the ballot sealed and postpaid may be 
mailed by the policy-holder to or may be delivered at the home 
office of the company.” 

October 18th was the date at least two months before said elec¬ 
tion, and,. as you know, this company long before said date de¬ 
clared its intention to mail, and it did mail, said statement, return 
envelope and proxy form to its policy-holders on such date before 
the 18th day of October as that in due course of mail the same 
would reach the policy-holder in the United States and Canada as 
nearly as might be on said 18th day of October. 

Nevertheless, before that date, and commencing on the 8th day 
of October, the International Policy-holders’. Committee, which 
is promoting the election of the candidates on the “ International 
Committee Ticket ” mailed to the policy-holders a circular, one of 
which is hereto attached, marked “ Exhibit A,” and made a part 
hereof. One leaf of this circular was designed for detaching and 
filling out as a ballot, and upon this leaf the Administration 
Ticket was (as shown by the exhibit) erased or crossed off in red 
ink. To it was attached the following instructions: 

“ Important. Sign your name to the above ballot immediately 
above the words in red, “ Policy-holder sign here,” in the presence 
of a witness. Have the witness sign his name above the words in 
red “ Witness Sign Here.” Place the number of one of your poli¬ 
cies in the space designated, date the ballot, and return by mail 
at once in enclosed envelope, placing in the space provided on the 
envelope your name, your postoffice address and the number of 
your policy as stated on your ballot. By doing this-you will cast 


300 


Senate Judiciary Committee. 


your vote against the present administration and in favor of a 
management in the interest of the policy-holders. Return this 
ballot at once to 

Hon. Richard Olney, Chairman, INTERNATIONAL 
POLICY-HOLDERS’ COMMITTEE, ' 

No. 30 Broad Street, New York City, New York. 

YOTE NOW! DO NOT DELAY.” * . 

With said “ Exhibit A” they enclosed an envelope, one of 
which is hereto attached, marked “ Exhibit B ” and made a part 
hereof, addressed as follows: 

“ Hon. Richard Olney, Chairman, 

The International Policy-holders’ 

, Committee, 

No. 30 Broad Street, New York, N. Y.” 

They also enclosed with said “ Exhibit A” an envelope solicit¬ 
ing contributions, one of which is hereto attached, marked Ex¬ 
hibit C ” and. made a part hereof. 

Second.—After circularizing the policy-holders of the company 
as above stated, said International Policy-holders’ Committee ro 
some extent changed its plan and mailed to the policy-holders of 
this company another circular, a part of which they designated 
“ Policy-holders’ Ballot,” containing the names of the candidates 
on the Administration Ticket, with two cross lines in red ink 
drawn across the same, and the names of the candidates on the 
International Committee Ticket arranged for voting as a ballot, 
and containing the following instructions: 

“ IMPORTANT. Sign your - name to the above ballot im¬ 
mediately above the words in red, “ Policy-holder Sign Here,” in 
the presence of a witness. Llave the witness sign his name above 
the words in red, “ Witness Sign Here.” Place the number of 
one of your policies in the space designated, date the ballot, and 
place in ENCLOSED ENYELOPE, which is addressed to the 
Company (DO NOT SEAL), placing in the space provided on 
the envelope your name, your post-office address and the number 
of your policy as stated on your ballot. Place this envelope in 
the envelope addressed to the Committee and mail. We will 
number your ballot and see that it is counted. By doing: this 
you will cast your vote against the present administration and in 


Testimony of Me. Kelsey. 


301 


favor of a management in the interest of the policy-holders. Re¬ 
turn ax, once to 

lion. Richard Olney, Chairman, INTERNATIONAL 
POLICY-HOLDERS’ COMMITTEE, 

No. 30 Broad Street, xNew York City, New York. 

VOTE NOW! DO NOT DELAY.” 

x / 

One of said circulars is hereto attached, marked “ Exhibit D ” 
and made a part hereof. 

With said “ Exhibit D ” they mailed also an envelope addressed 
to Hon. Richard Olney, Chairman, The International Policy- 
holders’ Committee, No. 30 Broad street, New York, N. Y., one 
of which is hereto attached, marked “ Exhibit E ” and made a 
part hereof, and another envelope addressed to the New York 
Life Insurance Company, 346 Broadwav, New York city, New 
York, U. S. A., one of which said envelopes is hereto attached, 
marked “ Exhibit F ” and made a part hereof, and a post card 
for mailing to them, one of which is hereto attached, marked 
“ Exhibit G ” and made a part hereof. 

' 1 especially direct your attention to that part of “ Exhibit D ” 

which requests the policy-holder, after executing the ballot, to 
“ place it in enclosed envelope, which is addressed to the Com¬ 
pany. (DO NOT SEAL)” 

You will observe that in the procedure described in the first 
paragraph hereof the International Policy-holders’ Committee 
secured access to the ballot by having it addressed to Richard 
Olney, Chairman. In the procedure here described they have 
reserved access to it by specifically instructing the policy-holder 
to return it to them, unsealed. 

Third. These documents so mailed to the policy-holders of the 
Company tended to, and we believe will, deceive and disfranchise 
many policy-holders of the Company for numerous, obvious rea¬ 
sons, among them the following: 

1. They urged the policy-holder to execute the ballot form and 
follow the instructions contained in said first circular before he 
had received, or could have received, the official statement, and 
before October 18th. 

2. The Statute requires the policy-holdpr to enclose the state¬ 
ment so marked in a return envelope, “ Having thereon the name 
and post-office address of the Home Office of the corporation.” 
Therefore, a return envelope having thereon the name and post- 


302 


Senate Judiciary Committee. 


office address of Richard Olney, Chairman, does not comply with 
the law, for the Statute expressly says: “ Such envelope contain¬ 
ing the ballot sealed and postpaid may be mailed by the policy¬ 
holder to or may be delivered at the Home Office of the Com¬ 
pany.” A mail ballot cannot be cast in any other way than in 
the way provided by law. 

3. A vote cast for Directors at this election, like every other 
vote cast at any election is necessarily and must be so deposited as 
that no third person would have a right to open and inspect the 
same. The election law expressly provides that “ any person 
* * * opening or being privy to the opening of any such en¬ 

velope shall be guilty of a misdemeanor.” But a letter addressed 
to Mr. Olney, Chairman, No. 30 Broad street, New York city, 
is not only not a letter “ having thereon the name and post-office 
address of the Home Office of the corporation,” but is a letter ad¬ 
dressed to a private person at an address other than the Home 
Office of the Company. It is his personal letter and there is no 
law prohibiting him from opening it. 

5. We are reliably informed that Richard Olney, Chairman, or 
his representatives, and the International Policy-holders’ Com¬ 
mittee, are opening, inspecting and making such disposition as ' 
they may choose to make, of the letters so returned to him. 

To some of the policy-holders they are sending a stereotype 
letter written on paper containing the letter-heading of the In¬ 
ternational Policy-holders’ Committee, and reading as follows: 


“ Dear Sir.— We are in receipt of your ballot properly exe¬ 
cuted. Under the New York law, however, it is necessary that 
this ballot be inclosed in an envelope with your name and address 
for this purpose addressed to the Insurance Company. Please 
write on this envelope in the spaces provided (in your own hand¬ 
writing) your name, your address and the number of your policy. 
Place this envelope unsealed in the second envelope enclosed, 
marked “ Ballot for Directors ” and addressed to me. "Kindly 
mail as soon as possible and we will make a record of your ballot, 
forward to the Company and see that same is voted and counted. 

Yours very truly, 

(Signed) RICHARD OLNEY, 


Per S. 


Chairman. 


The number of your policy as shown on your ballot is 




Testimony of Mr. Kelsey. 


303 


I enclose herewith, marked respectively, Exhibit “ II ” and 
Exhibit “ I,” the envelope contained in said stereotyped letter 
addressed to the Insurance Company, and the other envelope 
therein contained, the second envelope marked Ballot for In¬ 
spectors ” and addressed to Bichard Olney, Chairman. 

W e present these facts to you for your information and for 
such action, if any, as you deem called upon presently to take 
in view of the duties of your office. The New York Life Insur¬ 
ance Company, however, protests against the foregoing action of 
Richard Olney, Chairman, and of the International Policy-hold¬ 
ers’ Committee, and its representatives, as contrary to section 94 
of the Insurance Law, and to chapters 123 and 354 of the Laws 
of 1906. 


9 enclosures. 


Yours truly, 

james h. McIntosh, 

General Counsel. 


December 6, 1906. 

Mr. John H. McIntosh, General Solicitor, Neiv York Life In¬ 
surance Company, 346 Broadway, New York City. 

Dear Sir.— Your favor of November 26, 1906, is received, 
-setting forth in circumstantial detail certain alleged acts of the 
International Policy-holders’ Committee in mailing; circulars, re- 
turn ballots, and campaign documents to policy-holders of your 
Company October 8th and subsequent thereto, and of advising 
and inducing voters to execute and return ballots to persons not 
authorized to receive them and also by unsealed envelopes prop¬ 
erly addressed to the Company, but improperly enclosed within 
sealed envelopes addressed to others than the New York Life 
Insurance Company, whereby such ballots came into the pos¬ 
session of third parties and are subject to opening, inspection 
and such disposition thereof as the holders choose to make, in 
violation of the provisions of section 94 of the Insurance Law, 
and tending to, and in your belief such conduct will deceive and 
disfranchise many policy-holders of the Company. Your letter 
encloses nine exhibits of circulars, ballots, cards, and forms of 
envelopes stated to have been issued by the International Policy- 
holders 1 Committee, in furtherance of such unlawful scheme, and 
you request the Superintendent of Insurance as charged with the 
duty of supervising the election of directors of your company to 
be held December 18, 1906, to take'such action, if any, as he 
deems himself called upon presently to take in view of the duties 
of his office. 


304 


Senate Judiciary Committee. 


You also advise that the Yew York Life Insurance Company 
protests against the foregoing action of the chairman of the In¬ 
ternational Policy-holders’ Committee and its representatives, as 
contrary to section 94 of the Insurance Law, and to chapters 123 
and 354 of the Laws of 1906. 

Common report indicates the facts as you state them m so iar 
as policy-holders have been urged to execute prepared ballots 
against the administration ticket other than upon the official state¬ 
ment and to return their ballots to Hon. Richard OJney, Chair¬ 
man of the International Policy-holders’ Committee, at number 30 
Broad street, Yew York city, and in many instances to return 
the ballot in an envelope addressed to the Company but unsealed 
and placed within a second envelope to be sealed by the policy¬ 
holder and mailed to the address of the committee. It is true 
that by this process of voting the ballot goes into the possession 
of parties who may open it and examine the contents and control 
the custody of and final disposition of the ballot. 

That the acts complained of are a violation of law will prob¬ 
ably be denied by those charged with offending. 

Under the amendments to the Insurance Law providing for the 
election of a full board of directors, directions are given for sup¬ 
plying every policy-holder with an official statement containing 
all nominations and full information and instructions for execut¬ 
ing and returning the same as a ballot to the home office of the 
Company. In defining a plan to facilitate and protect the cast¬ 
ing of the vote, the law with an evident purpose of removing all 
danger of disfranchising policy-holders from mere technical de¬ 
fects, has supplemented the special plan devised by authorizing 
voters to indicate their choice of nominees for directors in writ¬ 
ing, other than upon the official statement, imposing no conditions 
as to form or contents so that the intent of the policy-holders shall 
fairly appear, except that such ballot must be signed in his own 
handwriting in the presence of a subscribing witness and shall 
set forth the number of at least one policy held by him, and when 
voted by mail must be postpaid and returned to or may be de¬ 
livered at the home office of the company in a sealed envelope 
upon which must be written his signature in his own handwriting 
anel his postoffice address and the number of at least one policy 
held bv him. 

The language of section 9 f pe rmits at the option of a policy¬ 
holder a manner of voting beyond the form of the official state¬ 
ment. and, quoting only what directly applies, is as follows: 


Testimony of Me. Kelsey. 


305 


or must otherwise suitably indicate in writing the 
name ot the nominee or nominees for whom lie desires to vote, 
an( l w such other writing when signed shall become 
a ballot. Such policy-holder must enclose * such other 
writing in such return or a similar envelope * * Such en¬ 

velope containing the ballot sealed and postpaid may be mailed 
by the policy-holder to or may be delivered at the home office of 
the Company.” 

I he Superintendent of Insurance does not feel empowered to 
prescribe what form of writing, method of execution, or manner 
of transmission is necessary to constitute a valid ballot, if the 
essentials above stated are complied with and the instrument is 
delivered to the inspectors of election at the home office of the 
company prior to the closing of the polls December 18th. Under 
the statute all ballots u shall be received by the inspectors of elec¬ 
tion subject to verification and ascertainment of the validity 
thereof and of the qualifications of the voter.” This positive re¬ 
quirement creates in the board of inspectors a tribunal to investi¬ 
gate and determine all conceivable objections affecting a ballot 
offered or rejected in the election, from whose decision an appeal 
or review can be had in the courts. As the statute seems to 
specifically delegate to the inspectors of election full jurisdiction 
over the questions submitted by your letter, and there being no 
change anticipated in existing conditions until the matters can 
be presented election day or afterward, to the disadvantage of any 
party interested, no action should, I think, be taken by this De¬ 
partment in relation thereto. 

Very respectfully, 

OTTO KELSEY, 

Superintendent . 

By Senator I Unman: 

Q. Is the language used in that communication the language 
of the Superintendent, is the Superintendent the author of the 
communication? A. I wrote it myself. 

Mr. Ainsworth.— It is already evidence that every letter 
written to the officers of these companies was written personally 
by him. No clerk or other subordinate had anything to do with 
that part of the business. 

20 



306 


Senate Judiciary Committee. 


By Mr. Hatch: 

Q. The other letters contained in this package which has been 
shown, were they of the same general type with the one just read ? 
A. They were of all characters and of every nature; they were in 
relation to constructions of the section and what might be done. 

Q. And to violations ? A. They were charges and counter¬ 
charges that continued all through the summer after the balloting 
started. 

Q. Were they received almost daily? A. Yes, sir; daily. 

Q. No day off? A. We never had a day off. 

Q. In addition to the preparation of the ballots you were re¬ 
quired to make preparation for the receipt and custody of these 
ballots ? A. No, the statute did not require that. 

Q. I show you another bundle of letters. What is that ? A. 
Correspondence from policy-holders in relation to the election, 
ballots, marked ballots, and generally in relation to the official 
statement and the votes in relation to the election. 

Q. Those were individual letters from policy-holders ? A. Yes, 
sir; those were from individual policy-holders. 

Q. Did you receive them all? A. I did. 

Q. Do you know how many there are? A. I do not. It says: 
li Total number 17.” It is so marked on the package. 

Q. And that is the bundle ? A. That is the bundle. 

Mr. Hatch.— I offer them in evidence. 

(Marked Exhibit No. 102.) 

Mr. Mayer.— The bundle just received in evidence, marked 
Exhibit No. 102, contains 77 communications of various kinds, 
of which the following is a brief abstract: 

94—C-l. Relating to voting by proxy. 

94—C-2. Relating to voting by mail. 

94-C-3. Relating to voting by mail. 

94-C-4. Relating to ballots, etc., and voting by mail. 

94-C-5. Relating to “ official statement, etc.” 

94-C-6. Relating to form of ballot and stamp for return 
envelope. 

94-C-6A. Official statement, circular letter and clipping, New 
York Life. 

94-C-7. Relating to “ official statement, etc.” 

94-C-8. Relating to postal card and form of ballot. 

94—C-9. Relating to circular, form of ballot, etc. 

94-0-10. Relating to form of ballot, etc. /' : T * Tj 


Testimony of Me. Kelsey. 


307 


94—C-ll. Relating to form of ballot, etc. 

94-C-12. Relating to two marked ballots. 

94—C-13. Relating to official statement and return envelope. 
94-C-14. Relating to marked ballot. 

94—C-15. Relating to marked ballot. 

94—C-16. Relating to letters, proxies, etc. 

94-C-17. Relating to circular and copy of official statement. 

94-0-18. Relating to circular letter and copy of official state¬ 

ment. 

94-C-19. Relating to official statement, etc.' 

94—C-20. Relating to postal card from New York Life In¬ 
surance Oo. 

94-C-21. Relating to marked ballot. 

94—C-22. Relating to marked ballot. 

94—C-23. Relating to marked ballot. 

94-C-24. Relating to marked ballot, circular, etc. 

94—C-25. Relating to marked ballot. 

94—C-26. Relating to circular, marked ballot, etc. 

94—C-27. Relating to marked ballot. 

94—C-28. Relating to marked ballot from agent of the New 

York Life Insurance Co. and from the International Policy- 

«/ 

holders’ Committee. 

94-C-29. Relating to marked ballot. 

94—C-30. Relating to marked ballot. 

» 

94-C-31. Relating to marked ballot. 

94—C-32. Relating to marked ballot, return envelope, etc. 

94-C-33. Relating to marked ballot. 

94—C-34. Relating to marked ballot. 

94—C-35. Enclosing clipping in relation to pending election 
of directors. 

94-C-36. Relating to voting by mail. 

94—C-37. Relating to marked ballot, etc. 

94—C-38. Relating to marked ballot. 

94—C-39. Postal card, marked ballot, etc. 

94-C-40. Marked ballot and other papers. 

94—C-41. Marked ballot and other papers. 

94-C-42. Marked ballot, circular letter and return envelope. 
94-C-43. Relating to ballots sent out by agents or supposed 
agents. 

94—C-44. Relating to marked ballots. 

94-C-45. Relating to marked ballots. , ‘ . i 

° L ' i _1 


303 


Senate Judiciary Committee. 


94-C-46. Relating to ballots, etc., sent out by agents. 
94-0-47. Relating to votes mailed. 

94—'C-4§. Relating to circular and printed statement. 

94—C-49. Relating to ballot received by bolder of forfeited 
policy. 

94-0-50. Relating to deposit of securities by New York Life. 
94—C-51. Relating to newspaper clippings, circular, official 
statement, and return envelopes. 

94—C-52. Relating to marked ballots. 

94—C-53. Relating to the matter of Randall Whittier. 
94-C-54. Relating to marked ballot. 

94—C-55. Relating to marked ballot, etc. 

94-C-56. Relating to postal card and marked ballot. 

94—C-57. Relating to voting on a joint policy. 

94—C-58. Relating to marked ballots. 

94-0-59. Relating to clipping, marked ballot and circular* 
letter. 

94-C-60. Relating to marked ballot, circular letter and return 
envelope. 

94-C-61. Relating to marked ballot enclosing letter of Deputy 
Attorney-General. 

94—C-62. Relating to choice of ballots. 

94—C-63. Relating to report that department had approved 
scratched ballot, etc. 

94—C-64. Relating to receipt of ballot. 

94-C-65. Relating to receipt of blank ballots. 

94—C-66. Requesting return of ballot. 

94-C-67. Relating to choice of ballots. 

94-C-68. Relating to receipt of blank and marked ballots. 
94—C-69. Request for blank ballot. 

94—C-70. Request for ballots. 

94—C-71. Relating to ballot received. 

94—0-72. Relating to a ballot cast. 

94-0-73. Relating to acts of agents. 

94-0-74. Relating to two ballots received from International 
Policy-holders’ Committee. 

t/ >. 

94-0-75. Relating to ballot received from International Policy- 
holders’ (Vunmittee. 

94-C-76. Complaint from George R. Scrugham relating to 
B. W. Ward and Jesse B. Fay. 

94-C-77. Relating to Charles A. Wilson. 


Testimony of Mr. K ELSEY. 



By Mr. Hatch: 

Q- I show you another bundle, Mr. Kelsey, what is it? A. 
Package of letters and replies from the Mutual Life Insurance 
(Ampany. 

Q. Let me ask you if that bundle of letters is the bundle of 
which General Mayer read the schedule, or brief reference to, as 
the first schedule which he read the earlier part of the day? A. 
I think it is. It is letters from the officers and others of the 
M utual Life Insurance Company to the Department. 

Q. And they are of the same general character? A. Yes, sir; 
in relation to the election and the general questions arising under 
that. 

Q. Mr. Kelsey, did the law make any provision with respect 
to the receipt and custody of the ballots? A. Kone except that 
they should be returned to the home office. 

Q. Was that matter the subject of discussion by you? A. It 
was the subject I took up with the Life Insurance Companies. 

Q. AY lien did you take that up? A. About the time we were 
ready to begin voting. 

Q. And who with ? A. 1 addressed letters I think to the presi¬ 
dent of each of the companies. 

Q. And what was the result of that? A. It was suggested for 
the purpose of having the Department join in the receipt of the 
ballots and their custody until thev were turned over to the in- 
specters of election on election day. 

Q. Who made that suggestion? A. I did. 

Q. And what was the result of that conference, and what ac¬ 
tion was taken with respect to that subject ? A. They considered 
the matter, the companies did, and notified me that they would 
accept mv request; it was because I feared the ballots going to the 
home office would lead to further complications on account of the 
intense feeling, as to whether the ballots were being safelv taken 
care of. They consented to that and I designated Mr. McArthur 
for the Mutual and Mr. Fuld for the Kew A"ork Life to co-operate. 
The mail was brought to them, the return ballots searched out and 
they were bound up in packages and sealed with tiie seal provided 
by the Department, and locked no in a vault that had a duplicate 
lock, and the representative of the Department had one key and 
the Company the other, so they were able to open it only when 
both were present. 


310 Senate Judiciary Committee. 

Q. This plan I understand you formulated? A. It originated 
with me entirely. 

Q. Now these ballots came in daily? A. Every day alter the 
18th day of October. * 

Q. And then these two persons whom you have named collected 
and took charge of them and put them in the vault ? A. Yes, sir ; 
they did so. They attended every day. 

Q. And they were so held until the time for the counting of 
the ballots? A. Until election day, when they were turned over 
to the inspector and receipted for. 

Q. Do you hold these receipts? A. I do. 

Q. In the correspondence there was mention of a marked and 
trick ballot, which was returned to the Committee. Explain 
that. A. There were two separate ballots. The marked one was 
sent out through the influence of the New York Life Insurance 
Company, as claimed by the International Committee, having a 
black mark through each name of each International Ticket. This 
was supplemental to the ticket or ballot sent out by the company 
to every policy-holder. The Peabody or trick ballot was the ticket 
with Mr. Peabody’s name heading for the Mutual. It was simply 
a ticket with the names of those candidates for directors, without 
any heading. 

By Senator Grady : 

\ 

Q. And I understand from the correspondence read by Julg> 
Mayer that it was complained of that another ballot had been sent 
out by the Policy-holders’ Committee, that is the policy-holders of 
the Mutual Life where the names of the Administration Ticket 
was stricken out with red ink ? A. It was the reverse. The same 
complaint was made for the other side 5 each side denounced the 
practice, while both practiced it. 

By Mr. Hatch: 

Q. That engendered considerable correspondence and feeling? 
A. Yes, sir; it did. 

Q. And that is found in the correspondence introduced in evi¬ 
dence ? A. It is. 

Q. You gave that personal attention, Mr. Kelsey ? A. I did. 

Q. Did the law make any provision for inspectors of election ? 
A. That they should be appointed by the Superintendent of In¬ 
surance, and not less than three. 




Testimony or Mr. Kelsey. 311 

Q. Wliat provision of the law was that? A. It is in the first 
section of the first act passed; I have forgotten the number, and 
it was subsequently amended, and it is the last one in the pamphlet 
edition which put over the election from November 18th to De¬ 
cember 18tli. It is the act which legislates all the directors out and 
provides for a new ticket and a new election. 

Q. What did you do with respect to the appointment of in¬ 
spectors of election ? A. I considered it myself for a time. I 
subsequently wrote to each policy-holders’ organization and to each 
company, stating my views and asking for suggestions of names. 

Q. I show you a letter. State what that is. A. That is a letter 
under date of November 20th. 

Q. W ritten by you? A. It was. It was directed by me to 
George I\. Scrugham, of the International Policy-holders’ Com¬ 
mittee. 

Q. And that is his office ? A. Yes, and a similar letter was sent 
to the other policy holders’ committee. 

Q. And to the companies ? A. And to the companies. 

Q. Does that contain your reply also, Mr. Kelsey? A. No. 

Q. It was not a reply; it was your own letter? A. It was a 
letter that I addressed. 

* 

Mr. Hatch.— I desire to offer that in evidence. 

(Marked Exhibit 104.) 

Q. Did you receive a reply to that? A. I do not recollect. We 
had a conference in New York. 

Q. But no written communication in reply ? A. I do not re¬ 
member. 

Q. You do not recall receiving it ? A. I do not recall that. 
There may be. 

Q. The suggestion contained in that letter went to all of the-, 
others that you mentioned ? A. Yes, sir. 

Q. And to the companies? A. Yes, sir; changed to make it 
apply to the separate companies. 

Q. Were the inspectors of election required to be policy-holders? 
A. Yes, sir; they were by statute. 

Q. Is this the reply to your communication, it is signed by Mr. 
Samuel Untermyer? A. It is a letter from me to Mr. ITnter- 
myer and his reply in response to my letter. 

Mr. Mayer.— I will read this exhibit 104: 




312 Senate Judiciary Com MiTTEft. 

STATE OF NEW YORK 

Insurance Department. 

Albany, November 30, ’06. 

Otto Kelsey, Superintendent of Insurance. 

% '* \ 

George R. Scrugham, Manager, International Policy-holder s 
Committee, 30 Broad Street , New I orlx\ 

Dear Sir.— Under chapter 123 of the Laws of 1906, as amended 
by chapter 354 of the same legislative session, the annual election 
of directors of every domestic life insurance corporation to he 
held December 18, 1906, is placed under the supervision of the- 
Superintendent of Insurance, who is directed to appoint at least 
three policy-holders of each corporation holding such an election 
to act as inspectors thereof. 

The importance of the election of directors and trustees in the 
New York Life and Mutual Life Insurance Companies, respect¬ 
fully requires the services as inspectors of election of men of 
good character, ability, and with special qualifications for the 
exacting work. Good judgment, tact, firmness, and freedom from 
special personal interest in the result of the election, and an 
established reputation for just and honorable dealing, are indis¬ 
pensable. 

The Superintendent of Insurance desires only that his ap¬ 
pointees prove to be competent and worthy of the confidence of 
the policy-holders and the public. To assist in providing an 
eligible list of names from which desirable inspectors of election 
may be selected for the election to be held in the New York Life 
and the Mutual Life Insurance Companies, will you for the Inter¬ 
national Policy-holders 1 Committee forward to the Superintendent 
for his consideration five or more names of policy-holders in each 
company who are voters in the election ? It is intended to appoint 
three or five inspectors of election, preferably three, for each com¬ 
pany, and to invite from each organization of policy-holders 
nominating a ticket suggestions of names as above requested from 
you, reserving to the Superintendent entire freedom of action to 
accept or reject names so submitted, or to appoint independently 
of any so proposed. If good reasons do not interfere against in¬ 
dividuals upon such lists appointments will be made therefrom in 
connection with selections by this Department from other sources 
as will best insure an impartial and efficient board of inspectors. 



313 


Testimony of Mr. Kelsey. 


I lie compensation of inspectors of election will probably not 
exceed $20 per day. They will liave entire charge of the ballot¬ 
ing, verification and counting of the votes, and will be authorized 
to employ necessary clerical and other assistance. All expenses 
of the election and canvass will be borne by the respective com¬ 
panies. 

Will you kindly give this matter your prompt attention if as¬ 
sented to ? An early appointment of the inspectors of election 
will enable them to become familiar with their duties and to 
avoid uncertainty and possible embarrassment in disposing of ques¬ 
tions which may be studied and prepared for in advance. I shall 
appreciate your advice and assistance in this matter. 

Verv respectfully, 

OTTO KELSEY, 

Superintendent. 


(JEGGENHEIMER, UNTERMYER & MARSHALL, 
30 Broad Street, New York, Dec. 4, 1906. 


Otto Kelsey, Esq., Supt. of Insurance, Albany, N. Y. 

Dear Sir.— Mr. Scrugham has handed me your letter of No¬ 
vember 30th. 

We trust that you will reconsider your suggestion that not 
exceeding live inspectors of election are to be 'appointed for each 
of the .two companies — the New York Life and the Mutual Life 
Insurance Company. Having regard to the large vote that will 
be cast in each of these companies the appointment of so small a 
number of inspectors of election will necessarily involve great 
delay in the counting of the votes and will prove a hardship to 
those engaged in the contest and a disappointment to the policy¬ 
holders by reason of the many weeks that will be required before 
announcing the result. 

I doubt whether your plan of allowing the inspectors to employ 
a force of unsworn and irresponsible clerks to assist them in their 
labors is contemplated or permitted by the law. Every person 
who handles a vote should be a sworn election officer amenable to 
the penal provisions of the law. 

We beg, therefore, to suggest the advisability of appointing not 
less than thirty inspectors of election for each of the companies so 
that there may be ten sets of three men in each set engaged in 
counting the vote at the same time. 




314 


Senate Judiciary Committee. 


There are likely to be many challenges and protests of ballots 
which the inspectors under your general direction will be called 
upon to decide, and as to which a general rule or line of policy 
might well be laid down at the beginning of the canvass. 

We should be glad of an early opportunity of discussing this 
entire subject with you and the parties in interest, at your con¬ 
venience. 

Very respectfully yours, 

SAMUEL UNTERMYER, 

Counsel for International Policy-holders’ Committee. 

The following is a reply of the TIon. Otto Kelsey, Superin¬ 
tendent of Insurance, to Mr. Unterinyer, under date of December 
5, 1906. 

Mr. Samuel Untermyer, Counsel, International Policy-holders' 
Committee Vo. 30 Broad Street, New York City. 

Dear Sir.— Your favor of December 4th in relation to the 
appointment of inspectors of election for the Yew York Life 
Insurance Company and the Mutual Life, is received. 

The plan being considered of three or five inspectors of election 
for each company is in view of the necessity for speedy decisions 
of all questions involving the qualifications of voters and the 
validity of ballots delivered to the inspectors. A force of thirty 
inspectors would 'render practically impossible a conference or 
unanimity of action in determining disputed questions. It has 
seemed to this Department that three or five men can carry the 
responsibility of the canvass, personally inspect the ballots in 
their charge and direct a sufficient number of employees engaged 
in the actual handling of the ballots in the presence of the in¬ 
spectors to insure a classification of the ballots and correct can¬ 
vass of the votes as finally determined to be lawfully cast, better 
than to endanger the progress of the canvass by the inevitable 
confusion incident to a large number of inspectors likely to dis¬ 
agree upon the many questions submitted for decision. Whether 
the force in the work are all appointed under the name of in¬ 
spectors may not be material, but the authority should be vested 
in a limited number of officers and under the statute it may be 


Testimony of Mr. Kelsey. 


315 


debatable whether, if appointed as equal inspectors of election, 
any members of the board could be designated as chief inspectors 
empowered to exercise a necessary authority over the others. 

1 shall be gratified at any time to consult with you or reprc- 
sentatives of your committee as to the organization and appoint¬ 
ment of inspectors of election. 

Very respectfully yours, 

OTTO KELSEY, 

Superintendent. 

Q. That letter was written by you ? A. It was. 

Q- f lid you have a conference in L ew York with anybody con¬ 
cerning this matter? A. I did. 

Q. With whom ? A. Mr. Untermyer, Mr. Scrugham, and Mr. 
Cromwell, Mr. James M. Beck, Mr. Bard, Mr. John De Witt 
Warner, Mr. Fell, and I think a few others representing the 
various organizations. 

Q. W as Mr. McKeen there? A. I think Mr. Beck represented 
the Mutual, and yet the Judge may have been there. 

Q. Was Mr. Hanson there? A. Y r es, sir. 

Q. And Mr. Hunter? A. Yes, sir. 

Q. And you were there? A. Yes, sir; I was there. 

Q. What took place that day? A. A full discussion of the 
plan of appointing inspectors and conducting the election. 

Q. What were the plans suggested, speaking very generally, 
in the course of that discussion? A. All the way from fifty in¬ 
spectors down. The plan I had in mind was suggested to them 
by me, of having five inspectors for each company; that would 
enable a quorum in case of sickness or ordinary delays of business 
engagements to do business, with authority to employ assistants 
in the mechanical work of opening, sorting and handling the 
ballots, and the number of watchers that might be present from 
each of the associations to scrutinize what might be done and to 
challenge votes. 

There was also a suggestion made by Mr. Untermyer, and con¬ 
sidered by Mr. Beck and Mr. Cromwell, of what they call the 
highest class of representative citizens, and they proposed paying 
them as high as $200 a day; and there was subsequent communica¬ 
tion by me with various men suggested, none of whom would 
undertake the work. 


31C 


Senate Judiciary Committee. 


Q. That is of the class of. men suggested by Mr. ITntermyer. 
and Mr. Beck? A. Yes, sir. 

Q. They wante d high-class and high-paid men ? A. \ es; they 
thought the confide lice of the people would be restored, by getting 
the best class of men. 

Q. Was there any suggestion from the others on that ? A. I 
think everybody who came had some suggestion. 

Q. Was there finally some harmony or agreement reached ? 
A. 1 think there was. The question of whether there could be 
more than one watcher from each interest present, that occurred, 
and we agreed that we should so construe the law, that in¬ 
spectors should have general charge of all questions and that 
tables could be arranged on which the ballots could be counted 


under the supervision of the inspectors and the watchers, to chal¬ 
lenge and to make such report as they saw fit. 

There was a variety of opinion as to the counting of the vot>*, 
and I think first, on the suggestion of Mr. Untermvrr, which was 
agreed to by the other gentlemen present, the experts Price, 
Waterhouse & Company for the Mutual and Touche, Kevin & 
Company for the New York Life were considereel experts of such 
high standing as to be acceptable to all parties. I then suggested 
the employment of these men. 

Q. Was that carried out ? A. Yes, sir. 

Q. Did you finally agree as to the number of inspectors at that 
time? A. They accepted mv decision. 

Q. Of five? A. Yes, sir. 

Q. And how long did that conversation last? A. The first 
day, the largeT part of the day — from 11 o’clock until 3; per¬ 
haps later. 

Q. A continuous discussion ? A. Yes, sir. 

Q. Diel the Mutual submit any nanios at that time? A. ft did 
not at all. 

Q. And the other did ? A. I he other company, the New York 
Life, and every organization of policy-holders I think submitted 
names in response to my letter. 

Q. That is, that was in response to the letter which has been 
read in evidence? A. Yes, sir. 

Q. Who appointed these inspectors? A. T did. 

Q. Was it determined that day what pav they should re-ei e^ 

A. No. 



y 


Testimony of Mr. Kelsey. 317 

Q. W hat was the range of prices suggested ?— $200 per day 
being the highest, what was the lowest suggested? A. Twenty 
dollars. 

Q. Who suggested $20 ? A. That was the amount fixed by me 
as a starter. 

Q. You started at $20 ? A. I said at the start $20 a day, and 
the communication I addressed to the men proposed stated that 
as the probable compensation. 

Q. What was the sum finally agreed upon as the compensation 
for that service ? A. Thirty-five dollars a day. 

Q. How did you arrive at $35 ? A. The amount was not finally 

fixed for several days after the conference. It was reached after 

«/ 

discussion held that dav. Mr. Cromwell and Mr. Beck were 
anxious to make it nt least $50 a day, and the inspectors were 
willing to take it. I fixed $35 as being on the whole the average 
which would secure men of right character who would render 
good service in presiding at the election. 

Q. That was the sum you decided upon? A. Yes, sir, $35 a 
day. It may be only fair to say inspectors of the Mutual^think 
it is insufficient, and still intend to have the matter taken np at 
the end of the canvass. 

Q. From your point of view whom did you look to as having to 
protect in connection with the question of expenses? A. The 
policy-holders. 

Q. And how was this suggestion received by the attorney for 
the company ? A. They were willing to pay what the Superin¬ 
tendent fixed. The statute docs not fix their compensation nor 
that it shall be paid by the company; but in the general statute it 
provides for an adequate number of inspectors, and that they 
shall be paid by the companies. 

I told the companies it should be paid by them, it being for the 
common interest of the policy-holders, and they assented to it. 

Q. And you made it as far as you could in justice to the policy¬ 
holders and the‘company? A. I did. 

Q. What did you do about the selection of the men for that 
position? A. I made inquiries. There were other names sug¬ 
gested and other applications submitted besides those submitted 
by these organizations. I employed a private individual to make 
a personal 'examination as to every name submitted, as to the 
character and reputation and general fitness of the applicant for 
that character of position, and as to any affiliations they might 
have with any of the organizations or companies. 





318 


Senate Judiciary Committee. 


Q. And lie reported to you ? A. He reported to me in writing. 

Q. That you did without consultation with anybody ? A. That, 
was a private matter to give me personal knowledge of the men. 

Q. And those reports with respect to the character of the men 
covered what? A. Their standing, their reputation, their habits 
and affiliations. 

Q. And their capacity ? A. And their capacity. 

Q. Those reports you now have in your possession ? A. I have 
those of the men I appointed. I did not keep the others. I also 
made personal inquiry among men with whom I was acquainted 
in Hew York. 

Q. Whom did you make inquiry of with respect to the character 
of these men and their standing ? A. The Attorney-General was 
one, the former Comptroller, Mr. Wilson, was another. 

Q. Did you have any conference with Senator Page with re¬ 
spect to it ? A. Ho. 

Q. Did you make any inquiry of anybody else besides the ones 
I have mentioned? A. I think I did; but I haven’t them in 
mind. 

Q. What other sources than the companies did you have for 
getting information about these men, and suggestions ? A. Letters 
of introduction. 

Q. How many of these did you receive ? A. There might have 
been half a dozen. 

Q. And after making these inquiries and having a report from 
your private investigation as to the personal qualifications of each 
man, you made an examination of it and if it was satisfactory 
appointed him? A. In the Hew York Life there was Mr. Lawshe, 
Koelble, Huse, Mr. Kincaid and Mr. Marks. Thev were selected 
as the Board. 

Q. And they have been acting since as inspectors? A. Mr. 
Kincaid and Mr. Marks withdrew from the canvass, or have ceased 
serving for a number of weeks past. They tendered their resigna¬ 
tions which I declined to accept; so that three members have con¬ 
tinued to canvass in that company. 

Q. Why did you decline to accept ? A. I thought it raised too 
/nany questions and might complicate the canvass. I thought it 
was their duty to serve to the end, having undertaken the canvass; 
and that it might imperil the election to have vacancies declared 
and make an attempt to fill the vacancies where no provision was 
made therefor, as it would be difficult for the new men to certify 


Testimony of Mr. Kelsey. 


319 


what had been done before they entered upon the work, and it 
would embarrass them in certifying to the result. 

Q. Whose idea was that ? A. My own. 

Q. And you say that you have never accepted those resigna¬ 
tions? A. No, sir. 

Q. And only three are continuing there ? A. Yes, sir. 

Q. Now give the names of the inspectors in the Mutual. A. 
Mr. McKim, Mr. Backus, Mr. Arnold, Mr. Ludlow and Mr. 
Ilalberg. 

Q. Was any question raised, Mr. Kelsey, with respect to the 
duties of the inspectors ? A. No question was raised except that 
in studying the matter it came into my mind. 

Q. Well, state to us what there was in connection with that. 
A. The statute does not define the specific duties or the powers 
of the Board. It makes the Superintendent the supervising au¬ 
thority. 

Q. That is the Superintendent of Insurance? A. Yes, sir; 
the Superintendent of Insurance. The Superintendent of Insur¬ 
ance has supervision over the entire matter, and I think should 
not be involved in the counting in or counting out of any ticket, 
and determining the qualifications and in certifying to the result. 
I concluded the best plan would be to have the inspectors of elec¬ 
tion take the entire responsibility of the outcome, that they should 
take charge of the election-room and all the ballots, and adopt 
the plan and be responsible entirely and that an appeal from their 
decision would be direct to the courts, and not through the Super¬ 
intendent; and that he should not attempt to exercise any au¬ 
thority over the inspectors. 

Q. Your plan was to impose the whole duty on the inspectors ? 
A. From my experience in other elections I assumed it was the 
only safe rule to put the responsibility on them, as with ordinary 
inspectors of election. After concluding that way I fortified my¬ 
self by consulting other authorities. ^ 

Q. Whom did you consult? A. The Attorney-General first; 
he concurred in the matter and subsequently with Senator Arm¬ 
strong. 

Q. When did you consult with Senator Armstrong? A. Out 
at Bochester. I went out on the midnight train, and saw him 
and came back the next afternoon. 

Q. What conversation did you have with him? A. I stated 
the situation and asked him whether from his knowledge of the 


320 Senate Judiciary Committee. 

situation there was any objection to that; and he agreed witn 
me in my opinion. 

Q. And gave it his approval ? A. He did. 

Q. Did you have any conference upon this subject or any other 
subject you mentioned in regard to your first conference after 
that? A. Yes, sir; just before the appointment of the inspectors. 

Q. What was that? A. It was in relation to the manner of 
conducting the election on election day. 

Q. Who was present ? A. About the same men except there 
was not so many of the organizations'of policy-holders on hand. 
Mr. Beck and Mr, Cromwell were there, and I think Mr. Warner. 

Q. Were the International policy-holders represented? A. Yes, 
sir; Mr. ITntermyer and I think Mr. Scrugham; although I am 
not sure. The statute had provided for the reception of all ballots 
subject to challenge. The purpose of the conference, not know¬ 
ing how many policy-holders might want to vote in person, th 1 
election being from ten to four, was to submit the propriety of 
receiving all ballots from all sources presented, reserving to each 
party in interest who might wish to challenge the right to vote, to 
challenge subsequently, and not to interfere with the orderly pro¬ 
ceedings during the day, and in that way we could get all the 
votes in first and then raise questions about challenging. That 
was agreed to. 

Q. Was there anything at that time, Mr. Kelsey, indicating 
how many men would present themselves personally to vote? A. 
We had no way of knowing whether there would be tv r o or three 
thousand or two or three hundred. 

Q. Was there any speculation on that? A. There was some 
discussion. 

Q. I asked you if the purpose you had in mind in not having 
challenges made at that time, but reserving the right to challenge, 
if that was for the purpose of bringing in all the votes in the 
event that a large number of persons presented themselves per¬ 
sonally to vote? A. Yes; so that we might that day take all the 
votes in without any delay in determining whether a vote should 
be received or not. 

Q. What was the fact as to the number of persons who pre¬ 
sented themselves personally to vote? A. Hot many voted per¬ 
son ally. It was thought possible to have 2,000 people there, and 
it would take a long time for them to vote, so many minutes for 
each one, and it would leave no time for all the proxies to be 
put in. 


Testimony oe Mr. Kelsey. 


321 


Q. So the plans you adopted would carry out the voting for 
that day no matter who appeared ? A. It would and it did. 

Q. Did you have any discussion with respect to the inspectors 
employing any clerical assistants? A. We did. 

Q. What was there said about that ? A. I think I have already 
stated that they were authorized — at least it was agreed — to 
employ the clerical assistants which it might develop would be 
necessary to carry out the scheme provided by the experts. 

Q. Who suggested that? A. I did. 

Q. Do you recollect the date you were in Yew York at the 
time you met with these men, and the appointment of the in¬ 
spectors was discussed, and you gathered in the information with 
respect to the character of the inspectors and the other matters 
you have testified to ? A. I can give you the information with 
the aid_of my memorandum. 

Q. State it. A. December 12th, conference at the office; De¬ 
cember 14th — 

Q. At what office? A. Eleven Broadway, the Department 
office in New York city. December 14th, another conference 
where Mr. Scrugham and Mr. Untermyer were present. Judge 
McKeen was there that day. I was at the office on the 15th, 
16th and 17th — one of those days was Sunday. 

Q. You were not there on Sunday ? A. I think I was. The 
18th was the election of directors. I met with the boards sepa¬ 
rately on the 19th, 22d and 24th. The inspectors — I have 
omitted to state that when I appointed them I first communicated 
and secured their consent to serve. I asked them to meet at 
the Department office to have an explanation of the nature of their 
duties and to organize on Monday, the day preceding the election. 
They all attended and the matter was gone over in detail as far 
as our conference had enlightened us. They took the oath of 
office and organized by electing a chairman, giving instructions 
as to opening the ballots and starting the election on election day. 

Q. Getting instructions from whom? A. Erom me. 

Q. Did you make the arrangements? A. I did. I went over 
the matter of their taking entire charge, and told them I would 
provide the necessary facilities and the necessary stationery; and 
I asked the experts to go there and they went there and were in¬ 
troduced to the inspectors; and we took some data on which to 
make some preliminary plans. 



322 Senate Judiciary Committee. 

Q. Did you explain the law to them ? A. I had the statute 
there. 

Q. And you stated your construction of it ? A. Yes, sir; and 
that the bills incurred would he referred to me for approval be¬ 
fore payment. 

Q. And you gave them, Mr. Kelsey, did you, as full and com¬ 
plete instructions as to their duties under the law as you under¬ 
stood it, as full and complete as possible ? A. I did. 

Q. And under that instruction, which you gave them, they 
have since acted ? A. They have. 

Q. Have you ever heard from any source any criticism of the 
method which you adopted in that connection? A. Hot from 
any source that knew the facts. 

Q. You have seen some things in the newspapers ? A. Certainly. 

Q. I am not speaking with respect to the members of the 
Armstrong Committee or its counsel. A. Oh ? no. 

Q. In connection with any matter by which you evolved this 
plan for holding the elections and carrying it out, have you had 
any criticism of that plan from that source? A. Ho adverse 
criticism whatever from that source. 

Q. Or from any other ? A. As I said — no other responsible 
source. 

Q. How you spoke, Mr. Kelsey, of employing these two firms 
of accountants ? A. I did. 

Q. You say that was the subject of discussion at these confer¬ 
ences ? A. It was. 

Q. Will you state to the committee the necessity which existed 
and which was the subject of discussion there for the employ¬ 
ment of these expert accountants ? A. Well, there was a great 
amount of it, and it took a great amount of time. The diffi¬ 
culties that arose from there being no registration list, or any¬ 
thing similar to it, such as we have in ordinary elections, made 
it necessary that every ballot presented should be received and 
they would be hunted out afterwards. For instance, a man could 
vote on a proxy, and then revoking that proxy he could vote 
again. He could vote by mail and subsequently appear and vote 
in person; and so it needed some scheme which would keep a 
tally in order to have the report accurate. 

Q. And you all agreed that that, was a subject for an expert? 
A. That and the multitude of votes that he had to provide for 
determined on that course. There were several hundred thousand 


Testimony of Me. Kelsey. 


323 


ballots. The inspectors at an ordinary election have a board of 
inspectors for every few hundred votes. Here we had several 
hundred thousand to be counted without any distribution or 
any preliminary list which would divide them into separate juris¬ 
dictions, alphabetically arranged. To get them in that shape was a 
very difficult and a very complicated problem. 

Q. Is there any difference between the books in the New York 
Life and those of the Mutual ? A. There is. 

Q. What is it? A. Well, it goes a great deal further than I 
can tell you. As far as the election is concerned, one keeps its 
books alphabetically arranged and the other has them arranged by 
policy numbers. 

Q. And you found out those systems, as far as it was necessary 
to determine what should be done in the election ? A. I did, but 
the responsibility I put on the inspectors. They employed the 
experts and I advised and consulted with them, before they deter¬ 
mined the plan to be followed. 

Q. You spoke of the New York Life. What is its system? A. 
The alphabetical system. 

Q. And what does the Mutual have? A. The policy numbers. 
The experts have adopted a different scheme for each company 
and they are working out well, although the New York Life has 
400,000 to start with. 

Q. What was the total number of votes cast? A. 408,000 in 
the New York Life and 350,000 or more in the other. 

Q. Has this plan made it easy to pick out the ballots at any 
time? A. Yes, sir. I have seen a person at the Mutual. They 
have the index card system there, but they have the ballots so 
arranged that they can get any one they want in very short order. 
I have seen them get a ballot there from any part of the world,- 
by calling a number, and getting it within fifteen to twenty 

seconds. 

Q. That has been the practical result of the system which you 
adopted? A. Yes, sir; one of them. 

Q. How is it in the New York Life? A. I have never seen 
them experiment in getting a vote, but they find anything they 
want. I have had them produce ballots, but not in any special 

time. 

Q. The system of cards and numbers in the Mutual facilitates 
that? A. It does. 


324 


Senate Judiciary Committee. 


Q. Does the difference in tlie two systems of keeping tlie 
accounts render necessary the two systems of keeping ballots ? 
A. I think it was a factor in determining each case. 

Q. Has the vote all been counted at this time? A. It is all 
counted subject to very slight variations, though elimination of 
duplicates and void ballots, some splits and things of that kind, 
and the action of the court, if it goes into court, on challenges of 
certain groups of ballots, mil affect it slightly. I think the Hew 
York Life Company challenges the whole of the International list, 
and the Peabody trick ballots are kept separate, and there is a chal¬ 
lenge against them. But the inspectors have passed on these, so 
that the result is practically known save as to these changes, pos¬ 
sible changes. 

Q. When will the result be completed ? A. It will not be com¬ 
pleted until the completion of the canvass. 

Q. When will that be ? A. One company expects to be through 
on the 20th of April, and the other thought it would be through 
as soon as the Mutual. The Mutual expects to be through by the 
20th of April; they tell me privately that is their idea. 

Q. Have you progressed far enough to state whether the scheme 
developed for this election will result in obtaining an accurate 
count? A. It will. 

Q. It counts these votes accurately ? A. It does. 

Q. And those to which there is no objection, it states those 
with certainty ? A. Certainly it does. 

Q. And those groups as to which there is objection; they are 
separated and classified ? A. Yes. 

Q. And whatever there is as to any particular group may be 
presented to court ? A. Yes, and if the decision of the inspectors 
is reversed they can state it to tlie court. There are a number 
of individual ballots that may not be taken in any connection 
with a group of the ballots. Sometimes the total ballots from a 
jurisdiction will be taken out; but that is by itself, every country 
and every state by itself. 

Q. So in every legal question that may arise there will be pre¬ 
sented no disputed question of fact? A. I do not think there 
will be. 

Q. At any rate it will not as far as these groups are concerned ? 
A. I do not see how it could. 

Q. So that this election in these two companies can be deter¬ 
mined by the decision of these inspectors of election passing upon 


Testimony of Mr. Kelsey. 


325 


ballots, subject to a review of all the questions that can be pre¬ 
sented by the courts. A. In the New York Life, each ballot has 
the record of the Board of Inspectors on it. That is, it will show 
what class it belongs to, what it is challenged for, and what the 
action of the Board of Inspectors was. 

Q. Is that true as to the others ? A. No. 

Q. As to the method you have adopted to determine the result 
you have described here, between the International Policy¬ 
holders’ Committees and the companies, has there been any criti¬ 
cism from that source of your plan ? A. I have not heard of any. 
It has not been formally presented. 

Q. Or otherwise called to your attention? A. No, sir. 

Q. Will you state how frequently you visited these companies 
while the canvass of these votes has been in progress ? A. I 
have been there every week, and sometimes two or three times 
a week. 

Q. And you were there all the time when the vote was being 
cast ? A. Yes, and three or four days afterwards; and I have 
been there once a week since. 

Q. And you have exercised over that condition a continuous 
supervision? A. I have. 

Q. I desire, Mr. Kelsey, to ask the general question namely; 
that in this correspondence and in the questions which have arisen 
during the progress of these matters to which you have testified, 
wherein correspondence has been necessary, and was produced 
here, will you state whether or not in each instance as to these 
letters they have been written by you, that is your act ? A. They 
have been. 

Q. Either in formulating the reply or actually replying to let¬ 
ters ? A. They have. 

Q. And that is true as to the whole ? A. As to the whole. 

Q. Can you tell us, Mr. Kelsey, why you thought it was neces¬ 
sary for you to personally supervise this from the start to the 
finish ? A. What, the election ? 

Q. Yes. A. I presume it is because I thought I knew more 
about it than anybody else. The experience I had had in the 
beginning. At the outset all the letters were written by me, and 
as the correspondence and work enlarged I kept track of it. It 
was merely that I felt anxious and responsible about it and kept 
it under my personal supervision. 

Q. You had the responsibility ? A. I had. 


326 


Senate Judiciaey Committee. 


Q. And therefore you wanted the information ? A. Yes, sir. 

Q. Was there a question that came up with respect to stock 
companies in which policy-holders are given a right to vote for 
directors ? A. There was. 

Q. Where did that arise and when? A. I-do not remember. 
There were two companies, the Germania Insurance Company and 
the Manhattan. 

Senator Page.— I want to ask a question: Por some purpose 
my name was brought in here in relation to the appointment of 
inspectors. If there is any statement or criticism of that to be 
made, it must be made now and here in open session. The reason 
of that is that subsequent to the adjournment of our last hearing 
certain statements which were false were given out which re¬ 
flected upon me. How if there is anything to be given out later 
I want it to be given out here in public before this Committee; 
and if there is any purpose in bringing my name in I want to hear 
it stated now. 

Mr. Hatch.— Do you wish to hear from me, Senator ? I would 
say that I propose to show here that Mr. Kelsey availed himself 
of all the knowledge and information from every source which he 
could obtain. That in inquiring into the character of the In¬ 
spectors of Election whom he appointed, he made inquiries of 
all the people he thought would be informed concerning the men 
he appointed. I have understood that among others he inquired 
of you; and I asked him, as I asked him with respect to Senator 
Armstrong several times during the progress of this examina¬ 
tion, not for the purpose of reflecting upon you but for the pur¬ 
pose of showing that Mr. Kelsey sought every avenue of informa¬ 
tion where he could get information. 

Senator McCarren.— On the contrary then, Judge, you in¬ 
tended to be complimentary to Senator Page? 

Mr. Hatch.— I certainly would desire to compliment him at 
all times. I certainly should not criticise Senator Page, as I 
know of no reason why he should be criticised or anybody else; 
and I understand, Senator, that this question arose over the 
appointment of your selection. I have been informed from some 
sources that Mr. Kelsey talked to you in respect to the inspectors 
appointed. 

Senator Page.— The fact is I wrote a letter recommending Mr. 
Lawshe. 

Mr. Hatch.— You recommended Mr. Lawshe to be a proper 
person? 





Testimony of Mr. Kelsey. 


327 


Senator Page.— Yes. 

Mr. Hatch.—And he has so proved. That was the sole object 
of the question. Senator. 

Senator Page.—All right. 

Senator Davis.— Then we had better adjourn now and hold a 
night session and proceed with the hearing to-morrow during the 
entire day. Is that satisfactory to you, Judge? 

Mr. Hatch.— Yes, sir. 

The Chairman.— We can start at half past ten, continue until 
half past twelve; take a recess until two; reconvene at two aqd 
continue until six. We will now take a recess until 8:30 this 
evening. 

Recess until 8:30 p. m. 

t 

After Recess, 8:30 p. m. 

The Committee met at 8 :30 p. m. 

Present.—* Senator Davis, Chairman, and Senators Armstrong, 

Grady, Page, Cohalan, Allds, Smith, McCarren and 

Taylor. 

Otto Kelsey resumes the stand. 

Examination continued as follows: 

By Mr. Hatch: 

Q. What was the total number of letters which you received 
and answered to the several companies and the Policy-holders’ 
Committee with reference to the election ? A. Five hundred and 
thirty. 

Q. Does that include correspondence relating to the same sub¬ 
ject from other sources ? A. It does not. 

Q. State whether or not that was voluminous ? A. It was large. 

Q. When we adjourned I had called your attention to the claim 
of the Germania Insurance Company. I now call your attention 
to page 176, of the opinions of the Attorney-General to the Insur¬ 
ance Department, to a letter there. Was it that letter? A. It is 
a letter from the Attorney-General in response to a request from 
me upon a letter from the Germania Life Insurance Company. 

Q. Of Hew York ? A. Of Hew York, 



328 


Senate Judiciary Committee. 


Q. Claiming what ? A. What the letter claims ? 

Q. No, what the Germania claims. A. They questioned 
whether they were subject to provisions for appointment of in¬ 
spectors under the law requiring the holding of an election, etc. 

Q. What position did you take with respect to that ? A. That 
they were. 

Q. And whom did you consult with respect to that matter ? A. 
The Attorney-General. 

Q. And did he deliver an opinion ? A. He did. 

Q. Did you answer the letter after receiving the opinion from 
the Attorney-General or before? A. I could not say now. Un¬ 
doubtedly I sent them a copy of the Attorney-General’s opinion 
afterwards. 

Mr. Hatch.— I ask to have this paper marked in evidence — 
this letter. (Marked Exhibit 105.) 

Mr. Mayer.— This particular opinion is Exhibit 105 and it is 
dated December 10, 1906. It reads as follows: 

* 

STATE OF HEW YORK — ATTOKNEY-GEHERADS 

OFFICE. 

Albany, December 10, 1906. - 
Hon. Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— In confirmation of the talk I had with you this 
morning in relation to the appointment of inspectors for the 
election of directors of the Germania Life Insurance Company, 
will.say that I have examined the provisions of the Insurance Law 
relative to the appointment of these inspectors, and while section 
94 of the Insurance Law and section 1 of chapter 354 of the Laws 
of 1906 are somewhat ambiguous and uncertain, I am of the 
opinion that the inspectors are properly designated by you as 
Superintendent. 

In this instance there is probably no one who will raise that 
question, however, and if the names of the proposed directors 
were properly certified to you and the parties voting as stock¬ 
holders in a domestic stock life insurance corporation, the election 
would probably be held to be regular. 

I am, however, of the opinion that the safe course to pursue 
would be to have the inspectors named by the Superintendent of 


329 


Testimony of Mr. Kelsey. 


Insurance; at least, until such time as a court construed the pro¬ 
visions of the two sections above referred to. 

I herewith return the letter and pamphlet of Insurance Laws 
left with me. 


Respectfully yours, 

GEO. E. PIERCE, 

Deputy Attorney-General in Charge. 

Q. Did you have any questions of the same nature coming to 
you from the Manhattan Life Insurance Company ? A. I did. 

Q. What questions did they ask ? A. That was referred to the 
Attorney-General also. It was about the same type of questions, 
whether it was necessary for the Superintendent to designate in¬ 
spectors. 

Q. And did you submit that to the Attorney-General ? A. I 
did. 


Q. And did you receive an opinion from him? A. I did. 

Mr. Hatch.— I desire to offer that in evidence; it appears at 
page 214 of this book I hold in my hand. (Paper marked Exhibit 
106.) 

Mr. Hatch.— Judge Mayer will read it. 

Mr. Mayer.— This is an opinion written on December 21, 
1906, in response to a request of the Superintendent of Insurance 
in which he asks for an opinion on the enclosed copy of a letter 
from the secretary of the Manhattan Life Insurance Company of 
Hew York. 

The opinion was rendered by the then Attorney-General him¬ 
self, and is as follows: 


STATE OF NEW YORK — ATTORNEY-GENERAL’S 

OFFICE, 

Albany, N. Y., December 21, 1906. 

To the Honorable, the Superintendent of Insurance, Albany, 

N. Y. 

Dear Sir.— I am in receipt of your favor of Oct. 5, enclosing 
copy of a letter from the secretary of the Manhattan Life Insur¬ 
ance Company of New York. 

That letter presented the question as to the application of sec¬ 
tion 94 of the Insurance Law to stock companies in which policy- 
holders, either in whole or in part, are given the right to vote for 
directors. 


I 


330 Senate Judiciary Committee. 

At the request of the representatives of certain other companies 
similarly affected, the matter has been held for the submission 
of briefs and for the opportunity for counsel to be heard. 

A careful examination of the statute has convinced me that in 
general the provisions of section 94 do apply to the Manhattan 
and similar companies. 

Section 94 of the Insurance Law, as enacted by the Legislature 
of 1906, provides for a general scheme by which policy-holders 
in domestic mutual life insurance companies may exercise this 
right of franchise. The same section also provides for policy¬ 
holders of any domestic stock life insurance corporation which 
may have or which shall hereafter become entitled to vote for 
directors and the general scheme or manner in which this right 
to vote may be carried out. In general terms this section pro¬ 
vides for the making of lists, filing of the same and the nomination 
by the board of directors of the administration ticket, and the 
sending of the nomination and proxies to those entitled to vote. 

The Manhattan Life Insurance Company is a domestic stock 
corporation, and if there was nothing in its charter or any subse¬ 
quent proceedings by which a policy-holder acquired a right to 
vote, this corporation would not be subject to the provisions of 
section 94 of the Insurance Law. But bv the charter of the Man- 
hattan Life Insurance Company it is provided that persons hold¬ 
ing policies of insurance for life and paying a premium of $75.00 
a year are entitled to vote for directors. This class then has the 
absolute right to vote for directors of the corporation and having 
that right, their rights are to be safeguarded in all the methods 
provided by section 94, and all of the rules and regulations in 
regard to the making of nominations by the board of directors 
and the filing of lists, the mailing of lists of nominations to the 
policy-holders of the candidates nominated, the statements, ballots 
and proxies apply to this company, so far as this class of policy¬ 
holders is concerned. 

The proper construction of this section, however, does not pre¬ 
clude the stockholders from voting upon their several shares of 
stock for such directors as they shall see fit and in accordance with 
the Corporation Law governing that subject. Their rights as 
stockholders are in no manner interfered with by this section. 

Practically, therefore, the board of directors of the Manhattan 
Life Insurance Company may nominate an administration ticket; 
one hundred or more persons holding policies of insurance for life 


331 


Testimony of Mr. Kelsey. 

and paying a premium of $75 per year may nominate an opposi¬ 
tion ticket, and when the election is held it becomes the duty of 
the inspectors of election to announce the number of votes cast 
by this class of policy-holders for the several tickets thus placed in 
nomination, and undoubtedly at the same time and place the in¬ 
spectors of election, appointed under the General Corporation Law 
governing stock corporations, would also announce the result of 
the number of ballots cast for the directors as voted by the stock¬ 
holders, and it would then become the duty of the inspectors of 
elections to add together these two classes, and the aggregate of 
votes in each class would determine the election of directors. 

By this construction of section 94 the rights of the policy¬ 
holders to vote are safeguarded and the rights of stockholders to 
vote are in no manner qualified or limited. 

It cannot be claimed that the Legislature intended that this 
class of policy-holders should have the exclusive right to elect the 
board of directors, nor can it be contended that it was the inten¬ 
tion of the Legislature to deprive the stockholders of their rights 
to vote, as it existed prior to the passage of section 94 of the 
Insurance Law. 

Of course, a stockholder would not be permitted to vote as 
stockholder the number of shares he held and also in addition 
thereto one vote as a member of the class; but, however, on that 
proposition there may be reasonable ground for difference of opin¬ 
ion. It would seem, however, that the stockholder must decide 
to remain either in one class or the other, that is to exercise his 
right as a stockholder and vote the number of shares held by him, 
or waive that right and vote as a member of the class in the man¬ 
ner prescribed by section 94. 

The absolute limitation of votes at the election to the candi¬ 
dates so nominated refers, of course, only to the class of policy¬ 
holder entitled to vote and in no manner affects the rights of 
stockholders to make nominations or to vote for whom they please. 
There is no provision in the law for mailing to stockholders a list 
of nominating candidates for the reason that the rights of the 
stockholders, as they existed prior to the enactment of section 94, 
are not and upon a construction of the section do not appear to be 
limited or restricted by this section. 

Yours very truly, 

JULIUS M. MAYER, 

A ttorney-General. 



332 


Senate Judiciary Committee. 


The question there involved was the rights of the stockholders 
of that particular corporation. 

By Mr. Hatch: 

Q. Mr. Kelsey, did you have a conference with respect to par¬ 
ticipating and non-participating policies ? A. Yes, we had. 

Q. Where? A. There was more than one. The first was at 
my office in the Department. 

Q. When was that? A. I could not fix the date. Some repre¬ 
sentative, Mr. Bro-Smith, I think, was one from Hartford, Con¬ 
necticut. He came in reference to right of other State com¬ 
panies using their forms of participating and non-participating 
policies. 

Q. What was the rule they sought from you? A. They wished 
to know, under the statutes, whether the Department would hold 
that another State company was limited to but one form after 
tiie first of January, as our Yew York State companies were. 
Those who issued a participating could not issue a non-partici¬ 
pating policy, was the rule. 

Q. And in this State what was the rule? A. The Department 
held that the same rule would apply, and upon their request the 
ruling was referred to the Attorney-General. 

Q. That was your ruling, that the same rule apply to foreign 
companies as applied to the domestic companies? A. Originally; 

. yes, sir. 

Q. Then after that time did vou have another conference ? 

t/ 

A. There, was some correspondence about it. They gave to me a 
brief, going over the ground and asking to have it reconsidered, 
and that it be referred to our Attorney-General. That is my 
recollection. 

Q. Let me ask you when the question first came up, did you, 
after you made a ruling upon it, refer it to the Attorney-Gen¬ 
eral? A. I did. 

Q. And what conclusion did the Attorney-General reach? A. 
The Attorney-General through Deputy Attorney-General Graham 
held that the rule applied alike to Yew York State and outside 
companies. 

Q. He sustained your rulings? A. Yes, sir. 

Q. Then what happened? A. Then there was correspondence. 
They wrote — 


Testimony of Me. Kelsey. 


333 


Q. \\ lio do you mean by “ they ’’ ? A. There was the Travel¬ 
ers’ Insurance Company. 

Q. Of Connecticut? A. Yes. They wrote and astked to have 
it reviewed. 


Q. And there was another? A. Yes, sir. 

Q. Was it the Connecticut Mutual? A. Yes; the Connecticut 
Mutual, the Travelers’ and the Aetna. It resulted in a conference 
at the office of the Attorney-General. 

Q. Who were present? A. The Attorney-General, Senator 
Bulklev, and Mr. Bro-Smith, and some other counsel represent¬ 
ing the other company, or else Mr. Bro-Smith represented the 
Mutual, and myself. 

Q. And Mr. Sperry ? A. Yes, sir. 

Q. A lawyer? A. Yes, sir. 

Q. Were you present at this conference before the Attorney- 
General? A. I was. 

Q. What position did they take? A. They took the position 
that they were not, under the statute, limited as the Hew York 
State'companies were. They had prepared elaborate briefs which 
they presented to the Attorney-General. It resulted in the At¬ 
torney-General reversing the former ruling. They went into 
the matter in detail in connection with the other sections of the 
law and it was held that they were not included under its pro¬ 
visions; that, is, they could issue both forms, while the Hew York 
State companies were limited to one. 

Q. Do you recollect whether or not you had any conversation 
with Senator Armstrong on that subject? A. I think I had. I 
talked with him frequently about whatever was pressing 

Q. Do you know what it was, what argument was controlling 
with the Attorney-General? A. The investigation showed that 
amendments to the law were made by putting in the word 
“ domestic ” and the original bill^did not have it; and I think 
that was the main point upon which the decision turned, it being 
argued that it showed the intention of the Legislature not to 
include the foreign companies. That recalls my talk with Sena¬ 
tor Armstrong. 

Q. Where did you have the conversation with him? A. In 
Albany. I remember that point now. He thought that under 
the comity between the different States they made the change in the 
first bill.. He said he regretted it as he thought the equity of the 
case was that all the companies should be required to conform 


334 Senate Judiciary Committee. 

to the one rule, but lie assented to the later opinion of the 
A ttorney-G eneral. 

Q. And then you promulgated that new opinion in accord¬ 
ance with the opinion of the Attorney-General ? A. Yes, sir. 

Q. How long was that argument at that conference ? A. Those 
gentlemen came in during the forenoon, and we went directly to 
the Attorney-Generals office — I should say it was two or three 
hours. I am not sure whether we adjourned for lunch or whether 
we went there immediately after lunch. 

Q. I show you your report, your preliminary report. Does 
section 101 refer to that subject? A. One hundred and one is the 
section which relates to standard forms of policies, and section 102 
is a section in relation to companies issuing participating policies 
vot being permitted to do a non-participating business. 

Q. Section 101 sets out the facts in regard to standard forms 
and the foreign forms of policy. There is the same provision 
there with respect to giving the foreign companies rights in alb 
the policies which this State does not have? A. Yes; I think so. 

Q. And that relates to the standard form of policy, section 101 ? 
A. Yes, sir; and the non-participating is found in section 102. 

' Q. How, what I desire to get at is, that foreign insurance 
companies still write insurance under their form of policy in this 
State, do they not ? A. They do, I think. 

Q. And that is for substantially the same reason that the act 
does not exclude them ? A. Yes. 

Q. How I show you your report. You called attention to that 
in your report under section 101 ? A. I did. 

Q. That is a preliminary report from your Department? A. 
Yes, sir. 

Mr. Hatch.— I desire to read that part of it into the record. 
After citing the various forms of policies the report says: “ Under 
date of September 1, 1900, tho Attorney-General after reviewing 
the history of the insurance legislation of the last session held 
that foreign life insurance companies who already had licenses 
to do business within this State are not required to conform with 
the standard of policy provided for in the act. It will be seen 
that here is an anomalous condition of affairs. Within the State, 
Hew York life insurance companies deliver only those forms of 
policies which in accordance with the provisions of the section 
have received the approval of the Superintendent of Insurance; 
outside of this State they may deliver ‘ Any form of policy not 



Testimony of Mr. Kelsey. 


335 


inconsistent with any of the provisions of the Insurance Law/ 
while the life insurance companies of other states may continue 
the delivery within this State of policy contracts not in entire 
harmony with our law. 

It remains to be seen whether or irot the apparent discrimina¬ 
tion against our own State companies is really harmful.'” 

Q. the policy to which your attention was last directed, the 
non-participating class, was referred to in what section of the 
law? A. Section 102. 

Mr. Hatch.— I desire to read that, the provisions of this sec¬ 
tion, section 102. 

u Section 102. Companies issuing participating policies not to 
do a non-participating business.— The provisions of this section 
when first introduced in the Legislature, applied to all life in¬ 
surance companies doing business within this State. After the 
public hearing before the joint committee of the Senate and 
Assembly it was amended to apply only to domestic life insurance 
companies. This seems further discrimination against our own 
State companies.’ 7 

♦ 

By Mr. Hatch: 

Q. Mr. Kelsey, will you state to the Committee the sections of 
the Insurance Law that are entirely new? A. I do not believe 
that I could offhand. 

Q. Can you give some of those —• give those you are able to 
from recollection ? A. Well, there is a limitation of business, 
new business, limitation of expense, standard forms, non-partici¬ 
pating policies, and there is the valuation section which is new, 
or partly new. There are a number of sections partly new and 
partly old. 

Q. Do you recall section 83 ? A. Hot distinctly at this 
moment; 84 is the one relating to valuation of policies. 

Q. Section 83 is the one with respect to the distribution of the 
surplus ? A. Oh, yes. The publicity section, that is new. Well, 
103 is what they call the publicity section. 

Q. Did you make any ruling under section 83 ? A. I did. 

Q. Do you recollect how many? A. I do not. Eleven, it is 
marked here (indicating). 

Mr. Hatch.— I desire to offer those in evidence. 

(Marked Exhibit 107.) 

Mr. Mayer.— This is an abstract of them: 





336 


Senate Judiciary Committee. 


83-1. Relating to the application of the section. 

83-1-A. Relating to “ Life Rate Endowment Plan ” of Union 
Central Life. 

83-2. Relating to the application of the section. 

83-2-A. Relating to substandard or under-average risks. 

83-3. Relating to annual dividends and existing deferred 
dividends. 

83-4. Relating to determination and apportionment of divi¬ 
dends. 

83-5. Relating to distribution of surplus. 

83-6. Relating to determination and apportionment of divi¬ 
dends. 

83-7. Relating to deferred dividends. 

83-8. Relating to distribution of surplus. 

83-9. Relating to annual distribution of surplus. 

83-10. Provision for annual distribution not retroactive. 

83-11. Relating to additions to old policies. 

Mr. Mayer.— I will read as a typical letter from this cor¬ 
respondence involving the ruling index as Ruling Ho. 4 under 
this section. 

It is a letter from the Home Life Insurance Company to the 
Superintendent of Insurance. It is dated January 30, 1907, and 
is as follows: 

Hon. Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— At the suggestion of Mr. Armstrong I bring to your 
attention section 83 of the present law, “ Distribution of Surplus 
to Policy-holders.” 

I infer from Senator Armstrong’s letter to me that he thinks 
an interpretation could be placed upon the law which would re¬ 
quire no change in the law and yet would enable us to make the 
distribution of surplus as we desire. 

I think perhaps the simplest way to bring the matter to your 
attention is to give you copies of recent correspondence on this 
subject. I therefore enclose copy of a letter to Senator Arm¬ 
strong, of January 21st, a copy of his reply of January 22d, and 
copy of my letter to him of January 14th. 

Very respectfully yours, 

GEORGE E. IDE, 

President . 



Testimony of Mr. Kelsey. 


337 


January 21, 1907. 

Hon. William W. Armstrong, Albany, N. Y. 

Dear Sir.— I know that it is your desire that the Insurance 
Law should be as perfect in its detail as possible. I therefore take 
the liberty of calling your attention to one section, which it ap¬ 
pears to me, may be amended slightly without in any way affect¬ 
ing the spirit of the law, and yet make it more workable. 

I refer to section 83 — “ Distribution of Surplus to Policy¬ 
holders.” 

In the early part of this section it reads that, after setting aside 
from the surplus such sums as may be required for dividends on 
capital stock and such sums as may be held for account of exist¬ 
ing deferred dividend policies and for contingency reserve, “ every 
such corporation shall apportion the remaining surplus equitably 
to all other policies entitled to share therein,” and the reading 
of the section is such that this apportionment is required to be 
made on the 31st of December of each year or as soon thereafter 
as may be practicable. 

The intention of the statute is that the surplus applicable to 
dividends should be determined as soon as possible after the com¬ 
pletion of the year and upon the basis of the results of the year 
just closed. This is perfectly proper and perfectly feasible, but 
there is an implied obligation that all policies whose anniversaries 
fall after January 1st shall receive the dividend resulting from 
the work of the previous year,— that is, the dividend on a policy, 
for instance, whose anniversary falls on January 3, 1908, shall 
be based upon the operations of the year 1907. 

It is customary to advise each policy-holder of his dividend 
when the premium notice is sent to him, and under the law this 
is to be sent several weeks before the premium falls due. You 
will therefore see that upon a policy whose anniversary falls in 
January or February it would not be possible to know the amount 
of the dividend at the time when the notice was sent to the policy- 
holder. In the past it has been our practice to analyze our ac¬ 
counts annually at the close of the calendar year, and then to ap¬ 
portion these dividends on policies whose anniversaries fall within 
twelve months from the following May 1st, I think that the 
apportionment could be fully completed so as to make it feasible 
to distribute the dividends on all policies whose anniversaries 
fall after April 1st. This would give us ample time in which to 


338 


Senate Judiciary Committee. 


analyze the accounts of the previous year; to make the distribution, 
which is work of considerable detail; and to have the accurate 
and final figures before the notice is sent to the policy-holder of 
his approaching premium. If some such change is not made, it 
will be necessary for holders of annual dividend policies, where 
the anniversary falls in January, February or March, to pay their 
premium in full and to receive their dividend check later, say 
March 31st. This would apparently apply to old as well as new 
business. 

The practice of paying dividends on participating policies on 
the anniversary of the policy so that the policy-holder can in every 
instance pay his premium less the dividend, if he so desires, and 
not have the receipt of the dividend postponed to a later period, 
is so well established that to break up this system, would, in my 
opinion, greatly confuse the accounts of the company and unsettle 
the policy-holders. There seems to me no particular need for this 
change. 

I believe the whole difficulty will be obviated if the clause re¬ 
ferred to should be made to read as follows: 

“ Every such corporation shall on April 1st, in the following 
year apportion the remaining surplus equitably to all other policies 
entitled to share therein.” 

t 

The words underscored are the ones which I should like to have 
inserted. Possibly some other verbiage may suggest itself to you 
as accomplishing the same purpose in a better way. I think the 
change would improve the law, and, as I said before, would not in 
any way change its spirit or intention. 

I have already mentioned this subject to Mr. Wainwright. 

Very respectfully yours, 

(Signed) GEO E. IDE, 

President. 


Senate Chamber, Albany, January 22, 1907. 

Mr. Geo. E. Ide, 256 Broadway, New York City. 

My dear Mr. Ide.— I have your favor of yesterday, and while 
I have not had the opportunity to give the matter much reflection, 
I can appreciate the difficulty you suggest and can see no objection 
to the amendment suggested, but is it necessary ? As the law now 




Testimony of Mr. Kelsey. 


339 


reads, the dividend is to he determined and apportioned as soon 
atter December 31st of each year as practicable. 

If, for the reason you suggest, it be impracticable to determine 
it earlier than April 1st, why is not that just the meaning that 
should be attributed to the word “ practicable? 77 

Yours truly, 

(Signed) WM. W. ARMSTRONG. 


January 24, 1907. 

Hon. William W. Armstrong, Senate Chamber, Albany, New 
York. 

My dear Mr. Armstrong.— I beg to thank you for your kind 
letter of the 22d instant. 

As a layman I have some hesitation of attempting to interpret 
statutes, hut I believe that the intent of the statute in question 
would be carried out, if we apportioned the dividend of each year 
— say on April 1st — and immediately began to apply it to 
policies whose anniversaries fall during the twelve months there¬ 
after, hut I did not think that the law could be so construed, in 
view of the sentence beginning in the latter part of the first para¬ 
graph of section S3, reading: 

“ The dividends declared as aforesaid in the case of a policy 
issued on or after the 1st day of January, nineteen hundred and 
seven, shall be payable respectively either upon the anniversary of 
the policy next after said thirty-first day of December or upon a 
certain day in the year following said date, etc., etc.” 

If you could secure for me from the Insurance Department or 
from the Attorney-General an opinion on the line suggested in 
your letter, this would be the easiest and simplest way of accom¬ 
plishing our purpose, and I hope that such an interpretation of 
the statute, from an authoritative source, is possible. 

Am I asking too much of you in requesting that you attend to 
this matter for me, in view of the interest which you have already 
shown ? 

Very respectfully yours, 

(Signed) 1 GEO. E. IDE, 

President. 




340 


Senate Judiciary Committee. 


P. S.— If an actual amendment of tlie law is necessary not 
only would tlie insertion have to be made, which I referred to in 

i* * 

my previous letter, but, in my opinion, the sentence u the divi¬ 
dends declared as aforesaid/ 7 to the end of that paragraph would 
have to be eliminated. 


February 4, 1907. 

J\lr. Geo. E. Ide, President, \Home Life Insurance Company, 256 
Broadway, Nek York. 

Dear Sir.— Your favor of the 30th ult. with inclosures, re¬ 
lating to section 83 of the Insurance Law, has been received. * 

The section provides that — 

“ Upon the thirty-first day of December of each year, or as 
soon thereafter as may be practicable, every such corporation 
shall well and truly ascertain the surplus earned by such cor¬ 
poration during said year. After setting aside from such surplus 
such sums as may be required for the payment of authorized 
dividends upon the capital stock, if any, and such sums as may 
properly be held for account of existing deferred dividend policies 
and for a contingency reserve in excess of the amount prescribed 
in this article, every such corporation shall apportion the remain¬ 
ing surplus equitably to all other policies entitled to share 
therein. 77 

I am of the opinion that this provision of the section simply 
requires that the determination and apportionment of dividends 
shall be made annually as soon after the thirty-first day of Decem¬ 
ber in each year as it may be found possible, proper allowance 
being made for all necessary work connected therewith. 

Respectfully yours, 

OTTO KELSEY, 

Superintendent. 

' Senator Cohalan.— To whom was that letter written ? 

Mr. Mayer.— The date of the letter from Mr. Ide to Mr. Kelsev 

o 

was January 1, 1907; the date of the letter to Mr. Armstrong 
from Mr. Ide was January 21, 1907; the date of the letter from 
Mr. Armstrong to Mr. Ide January 22, 1907; the date of the 
letter from Mr. Tde to Mr. Armstrong — the second one — 
January 24th; and from the Superintendent, February 5, 1907. 



Testimony oe Mr. Kersey. 


341 


It is simply typical of the questions which arose under the 
statute, showing the statute required constant construction as late 
as the present year. 

Mr. Hatch.— I offer those letters in evidence. (Marked Ex¬ 
hibit 108.) 

By Mr. Hatch: 

Q. Do you recall the provisions of section 97 of the Insurance 
Law? A. That is the section relating to limitation of expenses. 

Q. Under that section did you make any ruling ? A. There 
have been a great many rulings under that section. 

Q. I hand you a bundle of papers: What does it' represent ? 
A. It is the correspondence relating to section 97. 

Q. The rulings construing that section ? A. Yes, sir. 

Mr. Hatch.—.1 offer these eighty-three letters in evidence. 
(Marked Exhibit 109.) 

Mr. Mayer.— I may state for the information of the Com¬ 
mittee that section 97 of the Insurance Law relating to limitation 
of expenses, being an entirely new section as far as the law of this 
State is concerned, evoked a very considerable correspondence and 
it required many rulings from the Superintendent as well as from 
the Attorney-General. There are eighty-three in all here, and 
when I have read this list I shall then read one typical letter. 

This is a-list of the letters: 

97-1. Relates to an agency contract of a foreign (other State) 
life insurance company. 

97-2. Gives date when section becomes effective. 

97-3. Relating to computation of expenses. 

97-4. Construction of the word “ installment.” 

97-5. Relating to loans or advances. 

97—6. Relating to restriction of expenses for the procurement 
of new business. 

97-7. Relating to the employment of persons in the dual 
capacity of “ agency supervisor and personal producer,” also to 
traveling expenses. 

97-8. Relating to agency commissions. 

97-9. Relating to the treatment of business written at the close 
of the year 1906. 

97-10. Relating to applications secured before January 1, 1907, 
received by company after that date. 




I 


342 Senate Judiciary Committee. 

97-11. Relating to commuted renewal commissions and con¬ 
tracts of a general agent with subagents. 

97-12. Application of last sentence of the section to life insur¬ 
ance corporations of other States. 

97-13. Relating to the purchase of renewals, 

97-14. Relating to commuting commissions on renewal pre¬ 
miums. 

97-15. Relating to commuting renewal commissions. 

97-16. Relating to the application of the limitations of the 
section to companies and to general agents or managers; also to 
commuting renewal commissions. 

97-17. Relating to “ bonuses, prizes, and rewards, etc.” 

97-18. Relating to limitations of expense in connection with 
short term insurances. 

97-19. Relating to commuting renewal commissions; also to 
payments by a manager on his personal account entirely. 

97-20. Relating to the purchase of renewal commissions. 

97-21. Relating to commuting renewal commissions. 

97-22. Relating to employment of a person as “ agency super¬ 
visor and personal producer.” 

97-23. Relating to traveling expenses of an agent. 

97-24. Relating to contracts of a general agent with his sub¬ 
agents. 

97-25. Relating to “ bonuses, prizes, and rewards, etc.” 

97-26. Relating to commutation of renewal commissions. 

97-27. Relating to commissions that may be paid in 1907 on 
fractional premiums on policies issued in 1906. 

97-28. Relating to payments to “ agency supervisor or man¬ 
ager.” 

97-29. Relating to commuting commissions. 

97-30. Relating to computations for expenses. 

97-31. Construing the word “reward;” also relating to “honor 
rolls.” 

97-32. Relating to rates of renewal commissions on policies 
issued after 1906. 

97-33. Relating to commissions to a “ special representative.” 

97-34. Relating to application of section to a foreign life cor¬ 
poration. 

97-35. Relating to applications dated in 1906 and policies writ¬ 
ten in 1907. 

97-36. Relating to application of section to contracts entered 
into prior to January 1, 1907. 


Testimony of Mr. Kelsey. 



97-37. Relating to applications of 1906 and policies written 
in 1907; also to contracts issued prior to last date. 

97-38. Relating to commissions to a “ special representative.” 
97-39. Relating to the purchase of renewals. 

97-40. Relating to commutation of renewal commissions. 

97-41. Relating to insuring the life of an officer of the com¬ 


pany. 

97-42. Relating to commissions to agents. 

97-43. Relating to payment of “ brokerage.” 

97-44. Relating to agents’ commissions. 

97-45. Relating to contracts of a general agent with his sub¬ 
agents. 

97-46. Relating to a “ special agent’s contract.” 

97-47. Relating to cases where applications are made in 1906 
and policies issued in 1907. 

97-48. Relating to advances against renewal commissions; also 
to business where application is taken in 1906 and policy issued 

in 1907. 

97-49. Relating to the commutation of renewal commissions. 

97-50. Relating to first year’s commission or “ brokerage.” 

97-51. Relating to payment of commissions on "business issued, 
but not delivered previous to the close of 1906. 

97-5la. Relating to computing expenses. 

97-52. Relating to the payment to an agent of commission for 
policy of insurance on his own life. 

97-53. Relating to commuting renewal commissions. 

97-54. Relating to “ bonuses, prizes, and rewards, etc.” 

97-55. Relating to commuting renewal commissions. 

97-56. Relating to contract with general agent who is also a 
personal producer. 

97-57. Relating to the commutation of renewal commissions. 

97-58. Relating to payment of commissions. 

97-59. Relating to commutation of renewal commissions. 

97-60. Relating to renewal commissions and traveling expenses. 

97-61. Relating to change of policy and commissions thereon. 

97-62. Relating to the indorsement by a life insurance corpora¬ 
tion of a general agent’s contract. 

97-63. Relating to limitation of expense fixed by the section. 

97-64. Relating to first year’s commissions, and renewals and 
commutation of renewals. 

97-65. Relating to fees for medical examinations. 


344 Senate Jubiciary Committee* 

i 

97-66. Relating to commuting renewal commissions. 

97-67. Relating to “ advances.” 

97-68. Relating to employment as “Agency supervisor and per¬ 
sonal producer.” 

97-69. Relating to contracts made “ with general agents or 
direct with sub-agents.” 

97-70. Relating to payments made to “Agency supervisor and 
personal producer.” 

97-71. Relating to application of section to contracts entered 
into prior to 1907; also its application to foreign life insurance 
corporations. 

97-7la. Relating to agent’s contract. 

97-72. Relating to “loading and margin of gain and mortal¬ 

ity-” 

97-73. Relating to application of section. 

97-74. Relating to agent’s commission. 

97-75. Relating to nylic agents of the New York Life Insurance 
Company. 

97-76. Relating to an advertisement of the Equitable Life and 
payment to an “ agency supervisor and personal producer.” 

97-77. Relating to “ advances against compensation for first 
year of insurance.” 

97-78. Relating to contract with general agent of New England 
Mutual. 

97-79. Relating to contract with general agent of New Eingland 
Mutual. 

97-80. Relating to change of policy and compensation to agent. 

97-81. Relating to standards .to be used in determining ex¬ 
penses. 

97-82. Relating to contract of a general agent with his sub¬ 
agents. 

97-83. Relating to commuting commissions. 

Mr. Mayer (continuing).— I will now read a typical letter 
from that exhibit. It is a letter from the Equitable Life Assur¬ 
ance Society under date of September 6, 1906, and is as follows: 

lion. Otto Ivelsey, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— We understand that under date of June 20, 1906, 
the Attorney-General rendered you an opinion to the effect that 
policies actually issued in 1906 and not paid for, however, until 



Testimony of Mr. Kelsey. 


345 


after January 1, 1907, should not be included in the calculations 
provided for in section 97 of the Insurance Law. 

In this connection we should be glad to have your ruling upon 
certain questions as to how business should be treated in cases 
where the application and medical examination are made on or 
before December 31, 1906, and a binding receipt issued, but 
where the policy itself is not actually issued until after Janu¬ 
ary 1, 1907. In many of such cases, owing to the distance from 
the home office, the application and medical examination will not 
be received and acted upon at the home office until after Janu¬ 
ary 1st. Heretofore it has been the practice of the Society where 
such binding receipts have been issued to issue the policies as of 
the date of the applications, the insured having paid the premiums 
and taken binding receipts upon the making of the applications. 

The questions are as follows: 

First. In cases where the applications and medical examina¬ 
tions are made on or before December 31st, and binding receipts 
given on payment of the premiums, is the Society authorized to 
issue thereon any form of policy which it is authorized to issue 
under the present law, even though such policy may not be written 
until after the first day of January, 1907? 

Second. Would the ruling be the same in cases where no bind¬ 
ing receipt is issued ? 

Third. In either case, where the policy is not actually written 
after the first day of January, 1907, would the calculations pro¬ 
vided for in section 97 of the Insurance Law, as to the expense 
of obtaining new business, be applicable ? 

Thanking you in advance for your reply, we remain, 

Yours truly, 

’ (Signed) W. ALEXANDER, 

Secretary. 

September 12, 1906. 

Mr. William Alexander, Secretary The Equitable Life Assur¬ 
ance Society, 120 Broadway, New York. 

Dear Sir.—-Your favor of the 6th inst. relating to the method 
of treating business “ where the application and medical examina¬ 
tions are made on or before December 31, 1906,” but where the 
policy itself is not actually issued until after January 1, 1907, 
has been received. 



346 


Senate Judiciary Committee. 


Yonr first question is: 

“ In cases where the application and medical examinations are 
made on or before December 31st, and binding receipts given on 
payment of the premiums, is the Society authorized to issue 
thereon any form of policy which it is authorized to issue under 
the present law, even though such policy may not be written until 
after the first day of January, 1907?” 

To this my answer is that the Society may issue any such form 
of policy, the date thereof being the date of the application, when 
premium was paid and binding receipt given. 

Your second question is: 

“ Would the ruling be the same in cases where no binding 
receipt is issued ? ” 

To this my answer is that policies applied for in 1906, but not 
issued or delivered, nor premiums thereon paid until after Janu¬ 
ary 1, 1907, must be written on the forms prescribed in or pro- 
viled for in section 101 of the Insurance Law. 

Your third question is: 

“ In either case, where the policy is not actually written until 
after the first day of January, 1907, would the calculations pro¬ 
vided for in section 97 of the Insurance Law, as to the expense 
of obtaining new business, be applicable ? ” 

To this my answer is that computations for expenses are to be 
made by calendar years, and that the calculations provided for in 
section 97 would not apply to cases covered by your first question, 
but would apply to those covered by the second. 

Respectfully yours, 

OTTO KELSEY, 


Superintendent. 


By Mr. Hatch: . ' 

Q. Mr. Kelsey, in the more important of these rulings what 
did you do with respect to giving them publicity? A. We trans¬ 
mitted them to the company making the inquiry, and we also fur¬ 
nished them to the president or secretary of the Actuarial So¬ 
ciety— I think they call it'the American Society. 

Q. Then what was done? A. That Society had them compiled 
and printed and they forwarded proof sheets to us for examina¬ 
tion and correction, and then if there were any corrections to be 
made they made them and then they were issued in pamphlet form. 

Q. I show you three pamphlets: what are they? A. Pamph- 


Testimony of Mr, Kelsey. 


347 


lets issued so far on the opinions of the Attorney-General, and the 
rulings made by me on questions arising under the Insurance Law. 

Mr. Hatch.— I offer those in evidence. 

(Marked Exhibit 110, Exhibit 110A and Exhibit HOB.) 

Q. These pamphlets were distributed widely throughout the 
country after they were printed ? A. They were. 

Q. Mr. Kelsey, I think I have heretofore called your attention 
to the fraternal and benevolent orders, and rather confounded them 
with the business assessments. Will you please state the difference 
between the two? A. The fraternals are based on the lodge 
system, as they have local lodges and supreme councils or grand 
lodges, or something of that kind of the order to which they con¬ 
tribute ; and they have a social as well as a beneficial side for the 
members. One of them comes under Article VII and the other 
under Article VI. 

Q. And the fraternals are under what article ? A. Article VII. 

Q. Did you call attention to those in your preliminary report? 

A. I did. 

Mr. Hatch.— I desire to have that read to the committee. It 
is page 33 of the pamphlet. 

“FRATERNAL ORDERS.— (Article VII.) 

“ The experience of the past few years in some half dozen of 
the leading fraternal orders has demonstrated that the rates 
charged have been entirely inadequate. As a result the bene¬ 
ficiaries of those members dying in the early years of these institu¬ 
tions have received excess benefits disproportionate to the pay¬ 
ments made, while the persistent members had to bear the burden 
of such excess payments in addition to the necessary increase in 
their assessment rates with advancing age. The membership in 
these orders running into the hundreds of thousands representing 
particularly the wage earner, should have protection not contained 
in the existing Insurance Law. There can be no dispute as to 
the desirability of a sufficient and adequate rate. Whether such 
a rate can be established for existing orders with their vast mem¬ 
bership and present organization, is perhaps doubtful. The 
fraternal orders, apparently, will have to work out their own sal¬ 
vation, and the membership submit to that condition which has 
confronted many of their predecessors after years of membership, 
namely, an advance in rates which will compel many of the older 





348 


Senate Judiciary Committee. 


members to drop their insurance. While it may not be possible 
to correct conditions in the existing orders, it is practicable, and 
in the judgment of this department, it is within the province of 
the Legislature to safeguard the interests of future insurers by 
requiring new fraternal incorporations to charge adequate .rates, 
by express provision that a rate not lower than that of the National 
Fraternal congress table of mortality must be paid, and provided 
further, that no order of any other State or country can have 
authorization to transact business in this State unless its rates on 
its entire membership are based on such recognized table. The re¬ 
sult of such proposed legislation will, in our judgment, be bene¬ 
ficial to the existing orders as they, when reaching a point where by 
their own experience an adequate rate must be charged, will not be 
confronted, as they now are, with newly organizing orders charg¬ 
ing insufficient rates. 

“ The Superintendent of Insurance is also engaged in an en¬ 
deavor to regulate the forms of contract, by-laws and advertising 
literature of this class of corporations. In some instances they 
have written contracts which in the opinion of the department are 
misleading and ‘ ultra vires ? and have circulated literature cal¬ 
culated to deceive as to the kind of corporation represented, but 
they are being brought within the spirit and letter of the law. The 
by-laws of many contain provisions in direct conflict with law, but 
these are being eliminated as rapidly as met. It may be added at 
this point, also, that- Article VII does not give to the Superin¬ 
tendent of Insurance express power to exercise the close super¬ 
vision over these orders which ought to accompany a supposed 
official responsibility.” 

By Mr. Hatch : - 

Q. Article VII of the Insurance Law was not touched by the 
investigation ot the Armstrong Committee? A. It was not. 

Q. So your investigation with respect to this matter was out¬ 
side of any provision of law provided in the new legislation ? A. 
It was. 

Q. And I believe your attention was directed to this at the 
time'when you required all the correspondence of the Department 
to be brought to you personally? A. Yes, sir. 

Q- L ^ti state m youi report that you have caused their litera¬ 
ture to be revised. Will you state to the Committee what you have 
done in that regard ? A. 1 have required copies of their by-laws 


Testimony of Mr. Kelsey. 


349 


and form of contract and advertising literature to be sent in to the 
Department. Then to have them carefully read over, and to write 
to them as to corrections to be made in contracts or in advertising 
matter which seemed to be improper, misleading, x and calculated to 
deceive. 

Q. And I believe you said you exercised this power under 
your general supervisory power? A. Yes. I am engaged in that 
all the time. 

Q. And are you engaged in it now ? A. l r es, sir. 

Q. I show you a bundle of papers. Tell me what it is ? A. 
Correspondence between the Department and the Ilicians 
Auxiliary of Fraternal Societies. 

t/ 

Q. Located where? A. Few York citv. 

w t/ 

Mr. Hatch.—I ask to have them marked. 

(Marked Exhibit 111.) 

Q. Do you recall how many of these fraternal benevolent orders 
you have corresponded with aside from this one ? A. I do not, 
offhand. I should think one dozen, possibly more. 

Q. And each one of them has had a voluminous correspondence 
as the one we have produced ? A. I could not say that offhand. 
Sometimes an adjustment is made with two or three letters, and 
sometimes the correspondence went to great length. 

Q. This one we produced is not an extraordinary one ? A. No; 
I think it is a little over the average. 

Q. Because it went to the Attorney-General ? A. Y r es, sir. 

Q. When did the Ilicians Auxiliary come to your attention in 
reference to that matter? A. Within the week of my appoint¬ 
ment. 

Q. And then all this correspondence which ultimately resulted 
is devoted to corrections of these abuses ? A. Yes. 

Q. As the result of all this correspondence state whether or not 
the particulars in which you regard the company as improperly 
doing business were corrected ? A. They have been. 

Q. And do the companies as far as you know now conform to 
the law ? A. The company does. 

Q. And as a result of your correspondence with them ? A. Un¬ 
doubtedly. 

Q. Does this subject find any place in the investigation by the 
so-called Armstrong Committee? A. It did not.- 


O f 

o 


50 


Senate Judiciary Committee. 


Q. And really it is not within your jurisdiction at all ? A. It 
is not. 

Q. And you have only taken notice of it through complaints 
and inquiries made to your office ? A. Certainly, as a condition 
which should be remedied. 

Q. What class of business do these insurance companies do ? 
A. It is the smaller people in straightened circumstances that they 
deal with; they are not well off as a rule. 

Q. And they are a class of people easily preyed upon? A. 
Easily imposed upon. 

Q. And consequently in your judgment need more protection, 
more than average protection ? A. They certainly should have it. 

Q. I call your attention to the National Casualty Company. 
What company is that ? What class of business do they do ? A. 
It is a casualty company, I think, accident. 

Q. That is an accident company ? A. I think it is — casualty. 

Q. What did you discover with respect to that company? A. 
I cannot recall until I see some of the papers. 

Q. I show you some papers. What are they? A. There is 
correspondence with the National Casualty Company. 

Q. Will you state to the Committee, generally, what the char¬ 
acter of that company is; how it came to your attention, and 
what you have done ? A. The letter is addressed to the Depart¬ 
ment in relation to the form of policy they were proposing to 
issue in the insuring of workmen; what they call a u Factory 
Policy.” 

Q. What did you discover about it? A. That they were is¬ 
suing policies to the factory owners and the factory owner would 
deduct the premiums from the wages of the various workmen. 
He insured them and their names were not mentioned in the 
policy. 

Q. So they paid and had no contract of insurance? A. Had 
none themselves with the company. 

Q. What was this insurance directed against; what casualty? 
A. Accidents principally, I think, in the course of employment. 

Q. Sickness ? A. Undoubtedly that would be included. 

Q. Any provision in the event of death? A. I do not recall 
distinctly without referring to the papers. It usually includes it. 

Q. You called attention to that form of contract? A. I did. 

Q. How was your 'attention attracted to that subject, Mr. Kel¬ 
sey? A. I do not at the moment recall what first attracted my 


Testimony of Mr. Kelsey. 351 

attention to it, whether it was the letters of the company, or 
some workman insured who thought he was not receiving a fair 
show. 

Q. As soon as it was called to your attention you proceeded to 
investigate? A. Immediately wrote to the company. 

Mr. Hatch.— I ask to have it marked. (Marked Exhibit 112.) 

Mr. Mayer.— I will just read one letter out of this group from 
the vice-president of the National Casualty Company to the Su¬ 
perintendent of Insurance and the answer of the Superintendent 
thereto: 

Detroit, Mich., November 12, 1906. 

Honorable Otto Kelsey, Commissioner of Insurance, Albany, 

N. Y. 

Dear Sir.— Replying to your esteemed favor of the 9th rela¬ 
tive to a workman’s policy. We enclose herewith a sample of 
our workingmen’s policy together with the form of application 
and certificate, all of which will establish quite clearly that we do 
not issue a collective policy of any form. The forms submitted 
are just as much individual policies as is our regular industrial 
policy, the difference in the system being the mere matter of detail 
for the convenience of both the employer, who looks after the 
collections, and the policy-holder, who doesn’t know most of the 
time where his policy is or what it provides. It is true that 
but one policy is issued, but each policy-holder has a separate cer¬ 
tificate creating that policy individual to him in time of need, and 
those certificates are only issued to those who actually sign the 
application for the policy, and while those signatures are on one 
form, you will find it likewise becomes in each instance an indi¬ 
vidual application. 

Trusting that we have made the matter satisfactory and suffi¬ 
ciently clear. 

Respectfully, 

(Signed) W. G. CURTIS, 

Vice-President. 



November 19, 1906. 

Mr. W. G. Curtis, Vice-President National Casualty Company, 
Detroit, Mich. 

. Dear Sir.— Your communication of the 12th instant duly 
came to hand, together with sample form of “ Workmen’s In- 






352 


Senate Jueigtaey Committee. 


denmity Policy/’ “ form of application ” for same and “ certifi- 
cate ” issued thereunder. 

The policy is issued to an employer and states that it 

u does hereby insure the employees of.named 

in said schedule or schedules.” 

The schedule is the application above referred to, specified as 
being sent in your letter. The “ certificate ” reads: 

“ This is to certify that.an employee 

of . is insured under Policy ~No . , in 

accordance with its terms and conditions, with which strict com¬ 
pliance must be made under penalty of forfeiture, $. 

per month Accident Indemnity, $.. . per month. Sick¬ 
ness Indemnity, $. Accidental Death Indemnity.” 

which certificate has the name of your president and secretary 
printed thereon with a blank space for the signature of the 
“ policy writer ” and indorsed that the policy remains in pos¬ 
session of the employer who will permit the assured to examine 
it at any time. Thus we have three distinct documents to form 
the contract. 

I note your views concerning this form of contract and your 
statement: 

“ The forms submitted are just as much individual policies as 
is our regular industrial policy, the difference in the system being 
the mere matter of detail for the convenience of both the employer, 
who looks after the collections, and the policy-holder, who doesn’t 
know most of the time where his policy is or what it provides.” 

Your company is authorized to transact in this State the busi¬ 
ness specified in the second subdivision of section 70 of article II 
of our Insurance Law, viz., health and personal accident insur¬ 
ance and in the opinion of this Department the form of contract 
under discussion is one. which your corporation cannot properly 
issue under such authorization for the following reasons: 

Insurance is a personal contract whatever the subject-matter 
of the insurance may be. In a certain sense the form of contract 
herein referred to is anything but personal to the assured, for it 
is issued in the name of the employer, and while the schedule 
and certificate are made part thereof, the assured individually 
does not receive the material part of the contract for perusal and 
familiarization with its limitations and conditions. 









Testimony of Me, Kelsey. 


353 


In quoting from your letter I liave underscored a portion re¬ 
ferring to the assured and your justification of the issuance of 
what might be termed a collective or blanket policy as follows: 
“ who doesn’t know most of the time where his policy is or ivhat 
it provides ” 

One of the fundamental principles of what is requisite to a 
valid contract is that there must be a meeting of minds upon all 
the essentials to it. The assured as above set forth merely re¬ 
ceives his printed card, while what is most material is set forth 
in the policy which is made out in the name of his- employer. It 
is manifest, therefore, that the requisite knowledge for mutuality 
of assent to all the terms of the agreement is put beyond the reach 
of one of the parties thereto, unless he happens to closely scrutinize 
the reverse side of the card presented to him, which as I have in¬ 
dicated, shows that the policy remains in the possession of his 
employer —- 

“ who holds it as your (assured’s) agent, and who will be pleased 
to have you examine it at any time.” 

The schedule or application belonging to the policy, which is 
part evidence of the contract, is also taken from the assured for 
the purpose of attaching to said policy. It is true that the as¬ 
sured signs it and is thereby charged with knowledge of its terms, 
but it is a fair presumption that he merely signs in conjunction 
with his fellow workmen and does not read, depending on and 
placing faith in his employer, who is authorized in said schedule 
to deduct from his wages each month the sum of $1 and by sign¬ 
ing agrees that the insurance continues only so long as the signer 
remains in the employ of the person named in the policy. 

As having some hearing on this contract I have in view the 
case of Christy v. Korth British Ins. Co., 3 Ct. Sess. p. 360, where 
the agent upon application gave a receipt for the premium which 
contained only a brief statement of the risk insured, specifying 
the rate of the premium, amount of insurance, the property, the 
time insured, but did not specify the peril or risk insured against.' 
It was held not a contract, but merely evidence that the insured 
was entitled to a contract in the usual form, and that the usual 
policy must he looked to to ascertain the limitations and conditions 
of the contract and the company’s liability. 

It may be convenient for your company to do business in this 
way and make the employer the agent, of each one of the assured 
to hold the single policy issued, but I consider it contrary to the 
23 


354 


Senate Judiciary Committee. 


spirit of the law and request that your company on receipt of this 
communication please signify in writing your intention of at 
once discontinuing the issuance of this form of contract. 

Yours respectfully, 

OTTO KELSEY, 

Superintendent. 

Q. What was the result of that communication, Mr. Kelsey ? 
A. The ultimate result was conformity' with the request of the 
Department on the part of the insurance company. 

Q. And they are now doing what ? A. They are now issuing 
the policies to the person having the insurance. 

Q. Was this subject embraced within the investigation of the 
Armstrong Committee ? A. It was not. 

Q. Or within the new Insurance Law? A. It was not. 

By Senator McCarren: 

Q. Was the subject ever dealt with by a former Superintendent 
of Insurance? A. Not to my knowledge. 

Mr. Hatch.— I propose, Senator, to introduce a comparison be¬ 
tween the administration of Mr. Kelsey and the former adminis¬ 
tration. 

By Mr. Hatch: 

Q. I call your attention, Mr. Kelsey, to the General Accident 
Insurance Company of Perth, Scotland. What are those papers 
(indicating) ? A. That is correspondence of a similar character. 

Q. And with reference to what insurance company? A. To 
the General Accident Fire and Life Assurance Corporation, 
Limited, of Perth, Scotland, United States office at Philadelphia, 
Pennsylvania. 

Q. They were doing business in this State? A. Yes, sir. 

Q. Where ? A. They were issuing policies and their office is in 
Philadelphia. 

Q. Did they have an office in New York State ? A. I do not 
know that they did. The letters are all headed from Philadelphia. 

Q. And do you recollect when your attention was first called to 
this company? A. I do not recollect the date. 

Q. About the time of the date of your letter? A. It was in 
January of the present year; the letters are written in February. 



Testimony of Me, Kelsey* 


355 


Q. What did you discover with respect to that company? A. 
About the same, it related to their form of policy. 

Q. The same as the National Company? A. Yes, sir. 

Q. There were the same objections to that company as to the 
other ? A. There were. 

Q. And what was your course ? A. In the correspondence the 
Department held to the same position and asked for reformation 
of the contract. 

Q. With what result? A. Successfully. 

Q. And the policies they then issued were corrected ? A. Yes, 
sir; they were. 

Mr. Hatch.— I offer that in evidence. (Marked Exhibit 113.) 

Air. Mayer.— I will read one of them in evidence, the letter 
dated January 19, 1907. It is addressed to the Superintendent 
of Insurance and the reply of the Superintendent thereto. 

THE GENERAL ACCIDENT, FIRE AND LIFE ASSUR¬ 
ANCE CORPORATION, LTD., OF PERTH, SCOTLAND. 

Philadelphia, January 19, 1907. 
Mr. Otto Kelsey, Superinte7ident of Insurance, Albany, N. Y. 

Dear Sir.— I beg to acknowledge your favor of January 17th 
with respect to the Workmen’s Indemnity policy issued by this 
company. I have not heretofore been able to give this subject 
my personal attention, and I have only to-day reviewed the cor¬ 
respondence preceding your letter above mentioned. 

It seems to me that your objection to this form of contract is 
based on an assumed absence of opportunity for mutuality of as¬ 
sent to the terms of the contract between the parties to it. If 
this be your view, it is in my judgment due to the fact that our 
memorandum of the working plan of this form of insurance was 
not sufficiently comprehensive to make clear to you the fact that 
the employees under this proposition are fully informed and have 
every opportunity for knowing the terms of the contract under 
which we agree to indemnify them. 

In further explanation therefor, permit me to say that having 
interested an employee in the matter, our next step is to circular¬ 
ize the establishment by means of leaflets enclosed, marked 1, 2 
and 3, and in this connection would say that these circulars are 
printed in a variety of languages in order that the fullest infor¬ 
mation may he given. 



356 Senate Judiciary Committee. 

There is also posted throughout the factory or establishment 
that is to be worked, a number of notice cards, copy of which is 
enclosed and marked No. 4, which shows that the policy is to be 
issued to the employer. We then get the application of the indi¬ 
vidual for benefits under the policy, sample No. 5. We then fur¬ 
nish to the individual an identification card, sample No. 6, which 
indicates that the holder is a beneficiary under the policy held for 
his benefit by his employer as trustee. 

We respectfully submit that there is nothing in this method 
of operation which justifies the belief that the assured employee 
is not fullv cognizant of the conditions under which he is insured 
and the terms of the policy under which indemnity is provided. 
Any employee who has any desire to acquaint himself with the 
conditions of the contract has every possible opportunity to study 
it, as the contract held by the employer as trustee is of necessity 
always available for that purpose. 

As to the policy itself, I feel that some change could be made 
to advantage in the phraseology whereby both the employer and 
the employee might be designated as “ the assured/’ which would 
overcome some of the objections noted in your letter, and if your 
Department desires we will gladly submit a form of the policy 
amended in these details for your further consideration and ap¬ 
proval. This opportunity we trust will be afforded us before con¬ 
firming the last paragraph of your letter. 

Yours very truly, 

(Signed) FRANKLIN J. MOORE, 

United States Manager. 

January 24, 1906. 

• r 

Mr. Franklin J. Moore, United States Manager, The General 
Accident Fire and Life Assurance Corporation , Fourth and 
Walnut Streets , Philadelphia, Pa. 

Dear Sir.— Your favor of the 19th instant duly came to hand, 
together with the inclosures enumerated therein. 

If your company desires to issue in this State the blanket 
“ Workmen’s Indemnity policy ” it will be necessary for you to 
change the same in respect to having inserted in the line commenc¬ 
ing “ Does hereby insure ” the statement that it is the “ em¬ 
ployees ” of “ John Doe ” who are the assured. Provision 9 of 
this form of policy relating to the settlement under the terms 



Testimony of Mr. Kelsey. 


357 


thereof, operating as a release of all damages for claims against the 
assured ” by the workmen or employees must in consequence he 
eliminated. With the change which I have called for in reference 
to the contract insuring the “ employees,” it will be apparent that 
the word “ assured ” refers to them and not to “ John Doe,” the 
employer. 

If you will advise this Department that your company will issue 
to each one of the workmen insured under this form of policy a 
duplicate of the contract issued to u John Doe,” the employer, and 
incorporate therein the various conditions material and binding 
on the assured, as set forth in the separate schedule, you will be 
permitted to write such contract in the State of New York. 

Please acknowledge the receipt of this letter. 

Yours respectfully, 

OTTO KELSEY, 

Superintendent . 

Q. Was your attention shortly after entering upon the duties 
of your office attracted to the county and town fire insurance com¬ 
panies ? A. Yes, sir. They are not under the Insurance Depart¬ 
ment at all. It is a local organization that files a certificate with 
the Secretary of State, and then it is authorized to do an inde¬ 
pendent business. 

Q. IIow is membership acquired in it? A. I do not know the 
details. They simply get together, form a society, file the certifi¬ 
cate with the Secretary of State, and proceed to do business. 

Q. And then the additional members, do you know whether 
they filed certificates with the county clerk in the county in which 
they live? A. I am not sure of that. 

Q. You say they simply file a certificate with the Secretary 
of State and then do business ? A. The correspondence comes 
to us and we refer it to the Secretary of State for that class of 
organization. 

Q. Do you refer to those in your preliminary report ? A. I do. 

Q. Will you kindly read page 36 of your report in reference to 
that? A.’— 

“ TOWN AND COUNTY CO-OPERATIVE FERE INSUR¬ 
ANCE ASSOCIATIONS.— (Article. IX.) 

“ This class of corporations is not under the jurisdiction of the 
Superintendent of Insurance. They are required to report to 
the Secretary of State, annually, but such reports as they do make 


\ 


I 



358 


Senate Judiciary Committee. 


, ... r 


to that official are of the most meager description. They are 
merely accepted and filed, no matter in what form they may he 
presented. 

“ Doubtless there are many of these corporations which serve 
a useful purpose, but their incorporation is used in some instances 
as a vehicle by which unscrupulous persons mulct property owners 
in the rural districts, as has come to the notice of the Superintend¬ 
ent of Insurance through an action brought by the Attomey-.Gen • 
eral to annul the charters of a number of fraudulent concerns. 

“ The insuring public direct a large number of inquiries to the 
- Insurance Department with a view of obtaining information as 
to the financial standing of this class of corporations, which in 
turn refers them to the Secretary of State, in whose office such 
reports are required by law to be filed. The Secretary of State 
has in this respect no official source of inquiry, and there is no 
public office where information may be obtained as to the financial 
standing of town and county co-operative fire insurance corpora¬ 
tions. 

“Article IX of the Insurance Law, which regulates town and 
county co-operative fire insurance corporations, does not call for 
the submission of articles of incorporation to the Attorney-Gen¬ 
eral before the same are filed in the office of the Secretary of 

«/ 

State. In the investigation conducted by the Attorney-General’s 
office into the affairs of this class of corporations, it has been 
demonstrated that if persons organizing the same were required to 
submit the articles of incorporation to the Attorney-General, there 
are a great number of cases where they would have been pre¬ 
vented from filing the papers, as the fraudulent character of the 
proposed aggregations would have been immediately discovered.” 

Mr. Hatch.— That is from the preliminary report which has 
been printed and distributed. I offer it in evidence on the ques¬ 
tion of the initiative of the Superintendent. 

Q. Mr. Kelsey, do you recollect on what date the San Fran¬ 
cisco disaster occurred ? A. April 18, 1906. 

Q. That was prior to the time when you assumed office? A. 
It was. 

Q. That is, this office? A. Yes, sir. 

By Senator Page: 

Q. Mr. Kelsey, in this correspondence relating to Section 97, 
which I believe is marked, and which has a total number of 83 



Testimony of Mr, Kelsey. 


359 


letters, I find certain marks here, for instance on 97 it has the 
words “ Snpt. Ans’d. June 4, 1906.” Does that mean that letter 
was referred to you and answered by you? A. It looks like it; it 
has a memorandum as being referred to me. 

Q. And on the margin, does that endorsement mean that you 
referred it to the Attorney-General ? A. I cannot say from that. 
It may be. A number of them were before they were signed. 

Q. Who was Mr. Paterson? A. lie is the Chief Actuary. 

Q. How when we get down to Ho. 6 or 7 of this bundle I call 
your attention to the name of John S. Paterson and there is no 
mark of “ Supt.” on that letter ? A. Perhaps not. 

Q. Would that mean that letter was referred to Mr. Paterson 
and answered by him? A. Ho; it is brought to me. 

Q. What does this mean then ? A. It probably means that it 
went from the man who distributes the mail to Mr. Paterson; 
Mr. Paterson would then come to me, and in accordance with in¬ 
structions I gave he would draft a reply and then bring it to me 
for signature. Where two or three times a decision had been 
rendered on a given point he would draft a reply and call it to 
my attention, and I would revise it wherever it might be necessary. 

Q. And whenever we find in this bundle Mr. Paterson’s name 
that would be referred to Mr. Paterson ? A. That might have 
been. That would be the usual way. 

Q. Do you recognize the handwriting in Mr. Paterson’s name 
here (indicating) ? A. I do not; I presume that is Appleton’s. 

Q. And is “ Supt.” there ? A. Yes, sir. 

Q. Just tell us how this mail is received and opened, is it by 
Mr. Appleton and by him distributed ? A. It goes to Appleton’s 
desk first and by him is sent to the various bureaus. 

Q. And as I understand where it says Mr. Paterson in any of 
these, that means it went to the actuary’s desk ? A. Yes, sir. 

Q. And he drafted a ruling and submitted it to you for con¬ 
sideration? A. Where it was an original ruling it would be 
brought in to me to determine, and we would refer to the statutes 
to determine. That was settled by me, and then the answer was 
dictated to the stenographer by Mr. Paterson on actuarial 
questions. 

Q. And where the policy was settled by the rulings of the De¬ 
partment Mr. Paterson would dictate that answer himself and 
send it off? A. Ho, sir; it was brought to me for signature. 

Q. How would you run over these letters and mark those which 


300 


Senate Judiciary Committee. 


were not marked “ Supt,” and also tell us how many were marked 
“ Paterson ? ” A. I can do it, certainly. (After examining, it 
was found that 70 of the letters were endorsed with the initials of 
the name of Mr. Paterson; ten were endorsed “ Supt.” and three 
were unmarked.) 

Q. Was that the usual course of business in the Department; 
that the mail is sent to Mr. Appleton, and then by him opened and 
distributed to the various bureaus ? A. I am not sure it all goes 
to Mr. Appleton, but it is distributed to the various desks. 

Q. Do you know by whom ? A. I think it is through Mr. Ap¬ 
pleton. I presume the messenger takes it, but that is merely to 
carry it from the distribution desk. 

Q. Which is the distribution desk? A. I was assuming it to 
he Mr. Appleton’s. It may be that parts of the routine mail re¬ 
lating to the general office is opened there, I do not know. 

By Senator Grady: . 

Q. But of one thing, Ml*. Kelsey, you are entirely positive, and 
that is no letter containing a ruling was ever promulgated from 
your Department during your incumbency of your present position 
without it was submitted to he considered by you, and the letter 
containing it personally supervised by you before you attached 
your signature ? A. That is true in the case of the original wofik. 

Q. Would it be possible for any Superintendent of Insurance 
to take all of the letters of the Department in the first instance and 
consider them ? A. He could not. 

By Mr. Hatch: 

Q. IIow many letters were there in ten months you were there, 
Mr. Kelsey? A. Something over 16,000, as I have had it com¬ 
puted. 

Q. You have divisions in your Department? A. Yes, sir; di¬ 
visions in the Department. 

Q. And each division is in charge of a skilled person? A. 
It is. 

Q. And Mr. Paterson for instance has been there how long? 
A. Forty years. 

Q. And other employees covering what period of time ? A. All 
the way from forty years down to the chiefs of bureau, 18 or 20 
years, and possibly there is a clerk or two who has been there 
seven or eight years. 


Testimony of Mr. Kelsey. 361 

Q. About how much is the mail daily '{ A. Well, it varios * 
00 or 100 letters. 

Q. And those letters, some of them relate to new matter and 
some relate to routine business in the office ? A. They do. 

Q. And those you say are distributed to the desk of the man 
who has charge of the particular subject to which the letter 
refers? A. Yes, sir. 

Q. Now, in the rulings to which your attention has been called 
here, and which has been the subject of investigation, has any 
ruling ever gone out of the Department that has not been sub¬ 
mitted for your discussion, inspection and determination? A. No, 
it has not. 

Q. When letters are submitted to you in the manner you have 
described, where they have been drafted by others, have you made 
corrections in them ? A. Very frequently. It is a matter of daily 
occurrence almost. 

Q. Then what is done with that letter ? A. It is rewritten. 

Q. In accordance with the suggestion made by you ? A. The 
directions; yes, sir. 

Q. So in your testimony you desire to be understood as saying 
that the rulings upon these questions to which your attention has 
been directed, are your rulings and you have made the ultimate 
and final determination in each case? A. Yes, sir. 

By Senator Hinman: 

Q. Mr. Kelsey, speaking generally, before these letters had been 
dictated, had the consultations occurred with you and had you 
made your rulings, or would the different chiefs of bureau, take 
Mr. Paterson as an instance, would he draft the ruling and submit 
it to you ? A. On an original proposition he would bring in the 
letter and ask me about it; he would sit down and talk it over, and 
a decision would be reached by me and subsequently the letter 
would be dictated by him in the form I directed. As an expert 
I relied upon him for technical information, but I make the de¬ 
cisions after ascertaining the facts. 

By Senator Page: 

Q. I notice, Mr. Kelsey, that a number of these letters referred 
to the Superintendent have also the mark “ Ans.” For instance 
here is one referred to the Superintendent marked “ Ans’d. or 
A.”—I suppose that would mean answered by Mr. Appleton? 


362 


Senate Judiciary Committee. 


A. It would mean possibly that Mr. Appleton dictated the answer 
after taking directions. ' 

Q. I noticed on these three letters one has a Ans. J. S. PA ? A. 
That means answered by Mr. Paterson. 

Q. That would mean that he drafted the answer, although it was 
one of the letters referred to the Superintendent ? A. Very likely. 

Q. And the fourth one is answered in the same way ? A. Very 
likely. 

Q. Hot “ very likely; ” I was calling your attention to a fact. 
The fifth is marked a Ans. J. S. P.,” although it is marked 
“ Referred to the Superintendent ” and is counted among those 
referred to the Superintendent ? A. Very likely. I do not recall 
the fact. 

Q. Ho. 6 is “Ans. J. S. P.,” although referred to the Superin¬ 
tendent ? A. That is a memorandum. 

Q. And the eighth is also “ Mr. Paterson.” How the first one, 
however, has no particular memorandum except the “ Ans.”, but 
we find on the margin of it “Attorney-General.” How that is one 
letter of the first eight that were called to your attention that did 
not have the letter a A” on them, indicating that Mr. Appleton 
had answered it, but “ J. S. P.,” and this one was referred to the 
Attorney-General ? A. I do not know that it was. It may have 
been referred to him, but it was answered. It is not the office 
memorandum itself, it is a little minute which Mr. Appleton 
made. 

Q. I assume this mark “ Supt.”— these letters marked that 
way were cases where there was an original ruling wanted and 
then they would be referred to you in the first instance ? A. 
Frequently they came to me to be read over before Mr. Paterson 
had them. 

By Senator Hinman: 

Q. Take the memorandum on these letters which are indorsed 
“ Supt.” with a lead pencil. Is that in your handwriting ? A. 
Ho, sir. 

Q. And you say that indicates that some one who opened the 
mail considered that it should go first to you ? A. I should assume 
that was it; that it was sent to me direct from there. 

By Mr. Hatch: 

Q. And you sent it to the bureau to which it related ? A. Yes, 
sir, or I may have answered it myself. 


Testimony of Mr. Kelsey. 


363 


Q. And all tlie letters are signed by you ? A. Every one. 

Q. Including all they have called to your attention here? A. 
Yes, sir. 

By Senator Smith: 

Q. Were you in the habit, Mr. Kelsey, of signing the letters 
which issued from the Department over your signature without 
reading them ? A. No, sir. 

Q. You are thoroughly familiar with the matter contained in 
every letter that left the Department over your signature? A. 
Yes, sir. 

Q. Did Mr. Paterson have or not have authority to make rul¬ 
ings in the Department without consultation with you as to the 
matters ruled upon ? A. He did not; he never does and never did. 

. Q. Are you able to tell, Mr. Kelsey, from an examination of 
those letters marked “ J. S. P.” why they were referred to Mr. 
Paterson ? A. That is the daily course of the mail — anything 
affecting actuarial questions goes to his desk. 

Q. They were referred to Mr. Paterson’s desk because he was 
your actuary and the letters referred to actuarial matters ? A. 
Yes, sir. 

By Senator Grady: 

Q. And as well, Superintendent, from his experience in the 
office he could at once determine whether the letter presented a 
new question, or a question upon which a precedent had been 
established ? A. That he knew about too. 

Q. Then if it were a question that required an original ruling, 
the course you have already testified to was followed ? A. Yes, sir. 

Q. He came and discussed that question with you, gave you 
the point of view of his expert knowledge and you made the ex¬ 
amination for yourself as to the law. A. Examined the statutes; 
yes, sir. 

Q. And then indicated just the kind of answer you desired to . 
have prepared? A. Yes, sir; the decision the Department would 
make. 

Q. And in a case where a precedent had been established he 
would come to you with the precedent ? A. i r es, sir. 

Q. And explain to you the circumstances which made it simi¬ 
lar? A. Eor instance, if it differed he would call my attention 
to it; but as a rule I knew the circumstances. 



364 


Senate Judiciary Committee. 


By Senator Page: 

Q. Section 97 is one of the new sections of the law, is it not? 
A. Yes, sir; it is relating to limitation of expenses. That pro¬ 
voked as much correspondence as any. 

By Mr. Hatch: 

Q. Your final answer, as I understand you, Mr. Superintend¬ 
ent, is that no matter by whom or how these letters were prepared, 
they represented your ultimate judgment? A. That is true. 

Q. And were signed by you and promulgated ? A. Yes, sir. 

Q. You said the San Francisco fire took place on April 18 ? 
A. It started on April 18, the earthquake. 

Q. What was the date of your appointment? A. I was ap¬ 
pointed on the 2d of May and took office on the 17th. 

Q. Intermediate that time, that is, between May 2d and May 
17th, did you have any conference with anybody with respect to 
the business of the Insurance Department ? A. I did. 

Q. With whom ? A. With the then Deputy under Mr. Hen¬ 
dricks, Mr. Appleton. 

Q. Did you confer any with Superintendent Hendricks ? A. I 
do not remember conferring with him in relation to the office 
business. 

Q. When was the first circular with respect to that fire in 
San Francisco issued by the Department ? A. That was issued 
before I took office, in May. 

Q. Do you recollect the date of its issue? A. It was issued 
by the Department on the 12th of May. 

Q. Were you consulted with respect to its contents ? A. I was 
told of it. It was issued on the 12th. 

Q. But with its preparation you had nothing to do? A. Ho, 
sir. 

Q. When w T ere you informed about it ? A. About the time I 
was appointed. The returns were in and they were proposing to 
print. 

Q. I show you a circular, what is that? A v That is the circu¬ 
lar issued by the Department under the date of May 12tli, giving 
estimates by the various companies, of their losses in San Fran¬ 
cisco. 

Q. That is, of the fire companies ? A. Yes, sir. 

Q. Signed by Francis Hendricks, Superintendent? A. Yes, 


sir. 


Testimony of Mr. Iyelsey. 


365 


• Q. When did you see that circular first? A. I think it was 
during that week. 

Q. Vow, upon your assumption of the office, what did you do 
with respect to this situation and these acts ? A. I went over the 
figures, made inquiries as to the reports coming in, and provided 
for the second circular, or for the issuance of a circular requiring 
a sworn statement next time from the companies, to be issued, 
as-of the 1st of June, I think; and then it was changed so as to 
be of the 30th of June. 

Q. Did you make any investigation of the estimates of the 
conditions of the companies ? A. I went over them. 

Q. With whom ? A. Mr. Crippen, the statistician, and Mr. 
Appleton; that is my recollection. 

Q. Did you, at that time, have any communication with Mr. 
Hunter and Mr. Vanderpoel of the Yew York office? A. Do 
you mean before I took office? 

Q. Yo; after? A. I did. 

Q. When did you communicate with them, and what invests 
gation did you make? A. I could not give the date of the com¬ 
munication. The advices that were to be received when I took 
office were coming daily from Mr. Hunter and Mr. Vanderpoel 
by telephone. 

Q. Did you examine the whole of the matter relating to that 
subject that was in the office as soon as you entered upon your 
duties? A. I did. That is one of the first things. It is one of 
the most important, apparently. 

Q. And it first engaged your attention? A. Yes, sir. 

Q. Did you give anv instructions to Mr. Hunter and Mr. Van- 
derpoel? A. I did. 

Q. What were they? A. To keep the Department advised 
promptly of any changes that might arise, that they could obtain 
information in relation to. 

Q. What changes do you refer to? A. At that time there 
was no certainty of the solvency of a great many companies. It 
was being privately questioned, and as reports would come in I 
would ask them to furnish information on the report. 

Q. The reports came from where?-A. By personal inquiry 
and correspondence as to the condition of companies and as to the 
decrease made in determining the loss. 

Q. And who furnished you -with that information? A. Mr. 
Hunter and Mr. Vanderpoel. That is, when a report came in 


30 0 


Senate Judiciary Committee. 


1 would call them up and ask them to investigate it, and they 
would do so and reply sometimes in a few days. 

(J. That is, report with respect to the particular insurance 
company? A. Yes, sir. 

(J. And how did you communicate with them? A. By ’phone, 
usually. 

Q. And how did they communicate with you ? A. In the 
same way. 

Q. And also by correspondence ? A. Possibly. I do not recall 
any letters. Yes, there were letters in regard to one or two cases; 
1 remember letters, but in the outset it was almost all oral. 

Q. And what you desired at that time was immediate infor¬ 
mation ? A. Yes, sir. 

Q. The information or communication received from them was 
mostly telephonic ? A. Yes, sir. 

Q. In your subsequent investigation are you able to state as 
to whether the information vou received as to the status of the 


case was accurate? A. It was. 

Q. As proved by subsequent events? A. As proved by devel¬ 
opments. 

Q. What steps did you take, and when, if you recollect, with 


respect to calling for specific information in relation to this case? 
A. It was almost immediately after the first circular — possible 
it was started prior to that. 

Q. Will you state to the Committee the course of the business 


in getting this information and making communication with Mr. 
Hunter, and Mr. Vanderpoel, and then the steps you took? A. 
The information that is in the circular was the result of circular 
letters addressed to each of the companies. 

Q. That was when you issued the circulars? A. Yes, sir. 

t/ 7 

They sent us the tabulations called for and we compiled them 
and issued them as a circular. 


Q. You speak of “they?” A. Yes, sir; I refer to the fire 
insurance companies. 

Q. When did you issue your first circular? A. It was in July, 
and was as of the date of June 30th. They brought their sworn 
statements down to June 30th. 

Q. June 30th or June 20th? A. Thirtieth, I think. That is 
my recollection. A circular was issued in July and the reports 
show the condition of the companies to June 30th. 

Q. Well, a statement of their capital is given as of what date? 


Testimony of Me. Kelsey. 


367 


A. As of June 30th. They made up their statement as of that 
date, showing their capital losses, salvage, etc. 

Q. When was the statement made prior to that time? A. The 
first circular of May 12th. 

Q. What date does that go back to? A. It simply requests a 
statement of their losses. 

Q. Did you have any statement of their capital as of the year 
1905 ? A. These were compared with the annual statement of 
the preceding year. 

Q. That was on file in the Department? A. Yes. 

Q. Then that furnished your standard of comparisons with the 
next statement? A. Yes, sir. Their condition as of December 
31st, in connection with their estimate of losses. 

Q. And then after you acquired your information you asked 
for a statement of their condition as of June 30, 1906 ? A. A 
verified statement, the second one was. 

Q. So as to bring it down to that time ? A. Yes, sir. 

Q. What information did vou ask for at that time? A. It 
was a little more extended than the first request. I think we 
asked for their capital, their gross insurance and the losses, and 
possibly their salvage was asked for too. 

Mr. Hatch.— I desire to introduce these two circulars in evi¬ 
dence. (Marked Exhibit 114A and Exhibit 114B.) 

Mr. Mayer.— The first circular was issued by Superintendent 
Hendricks under date of May 12, 1906, aud the second was issued 
by Superintendent Kelsey under date of July 28th, and they are 
as follows: 

STATE OF HEW YORK — INSURANCE DEPARTMENT. 

Albany, May 12, 1906. 

On the 23d ultimo the Department called upon all fire insur¬ 
ance companies of this State and also of other States and of 

foreign countries authorized to transact business in this State, 
© 

for an estimated statement of their losses in the recent conflagra¬ 
tions in San Francisco and other cities and villages in California, 
to be returned not later than the. 5th instant. 

The following tables show for companies of this and other 
States, the paid-up capital, net surplus, surplus to policy-holders 
as of December 31, 1905, and the estimated loss, and of foreign 
fire companies of other countries, United States capital under 



368 


Senate Judiciary Committee. 


section 27, Insurance Law; United States surplus to policy-hold¬ 
ers E3 of December 31, 1905, and the estimated loss. 

In the Department circular letter of April 23d, calling for the 
estimated loss of the companies, we advised that a sworn state¬ 
ment as of June 1st would be required. It is now evident that 
at that date the companies will not be in a position to maike such 
returns owing to the fact that in many instances their records 
have either been destroyed or are still inaccessible, therefore, 
sworn returns of the companies will be called for as of June 
30th. When such returns are in hand they will be tabulated and 
published. 

Respectfully, 

(Signed) FRANCIS HENDRICKS, 

Superintendent. 

April 23, 1906. 

Dear Sir.— It is the intention of the Department to call upon 
all fire insurance corporations authorized to transact business in 
this State for a sworn statement of their losses in the recent con¬ 
flagrations in San Francisco and the other cities and villages in 
California, such statement to be used as of June 1, 1906. The 
necessary blank for this return will be mailed at an early day. 

In the meantime, in order that we may answer inquiries, we 
would ask that you furnish us as soon as practicable and cer¬ 
tainly not later than May 5th proximo, with an estimate of your 
California losses, sending this information by wire and confirming 

by letter. 

«/ 

Respectfully yours, 

(Signed) FRANCIS HENDRICKS, 

Superintendent. 


(A copy of this circular sent to all companies appearing in 
Part I of the Department report for 1906.) 

STATE OF NEW YORK — INSURANCE DEPARTMENT. 


Albany, July 28, 1906. 

On the 20th ultimo every joint stock fire and inland marine 
insurance company transacting business in this State was called 
upon by the Department for a sworn statement as of June 30th 
as to its losses in California, containing the following information: 




Testimony of Mr. Kersey. 


3G9 


Gross amount of insurance involved in risks destroyed or dam¬ 
aged. 

Deduction for amount to be recovered from reinsurances. 

Deduction for estimated salvage. 

Total deduction. 

Net amount of loss as shown by its records on June 30, 1900. 

Such returns prepared by the companies are carried in the fol¬ 
lowing tables, so compiled as to show the surplus to policy-holders 
contained in the annual statements made to the Department* for 
the year ending December 31, 1905, and in connection therewith 
the results of the California losses. 

Respectfully, 

(Signed) ^ OTTO KELSEY, 

Superintendent. 

The committee then adjourned until Friday, April 5th, at 
10:30 a. m. 


Minutes of Adjourned Hearing Before Legislative Committee 
Appointed to Investigate the State Insurance Department, Held 
in the Senate Chamber, Capitol, Albany, March 29, 1907. 


Senate Chamber, Capitol, 

Albany, March 29, 1907. 

Minutes of Adjourned Hearing Before Legislative Committee 
Appointed to Investigate the State Insurance Department, Held 
in the Senate Chamber, Capitol, Albany, March 29, 1907. 

Met pursuant to adjournment, at 10:30 a. m. 

Present. — The Chairman and members of the Committee, 
and counsel as before. 

Otto Kelsey resumed the stand and further testified as fol¬ 
lows : 


24 


1 


» _ 





370 Senate Judiciary Committee. 

By Mr. Hatch: 

Q. Mr. Kelsey, in order that we may get started, you issued the 
circular which was read ? A. I did. 

Q. And that called upon the insurance companies for informa¬ 
tion as to the surplus and as to policy-holders on that date, and 
all insurance involved in the San Francisco fire; the reinsurance, 
the admitted salvage, the actual amount of loss in San Francisco? 
A. That is correct. 

Q. That is, those were the subjects in that circular upon which 
you required information? A. A sworn return. 

Q. And following that, how frequent was your communication 
with Mr. Vanderpoel and Mr. Hunter in Hew York with respect 
to the information upon those subjects from the insurance com¬ 
panies? A. Daily, prior to the issuance of the circular. The 
replies were not compiled and distributed until the 20th of July, 
as of the 30th of June. 

Q. But from that time on your communication with the Hew 
York office and with the gentlemen I have named, was a daily 
comunication ? A. Every business day. 

Q. And will you state to the Committee how you made that 
communication —• what you did ? A. It was usually by tele¬ 
phone. 

Q. Well, what time in the day usually would you call up the 
Hew York office? A. There would be no fixed time; whenever 
we could get them most conveniently. 

Q. And that would usually be about what time? A. Usually 
about ten o’clock in the morning; but it would be later during the 
day if inquiries came in or matters were referred to us asking for 
information. 

Q. You were in receipt of constant communications upon that 
subject? A. It was all the time. There w 7 as great excitement 
ovo v the situation in insurance circles. 

Q. What instructions did you give to Mr. Hunter and Mr. 
Vanderpoel or either of them, with respect to that situation ? A. 
That they must keep me posted. 

Q. Upon what subject? A. Upon the questions that were con¬ 
tinually being received as to reports concerning the various in¬ 
surance companies, some in this State and some outside of this 
State; as to their condition and the amount of their losses and 
the prospects of pay and compromises, and everything connected 
with the insurance business. 


Testimony of Mr. Kelsey. 


371 


Q. The purpose of this was to determine constantly the status 
as to solvency of these insurance companies ? A. It was. 

Mr. Hatch.— Have we offered the circular of July 28th in 
evidence ? 

The Witness.— Yes. 

Q. How, how long, Mr. Kelsey, did that daily communication 
between yourself and the Hew York office upon these subjects 
continue? A. Until the latter part of December. 

Q. Beginning on the 1st of July? A. It began as soon as I 
was in the office. At that time there was no estimate given — 
but a mere first estimate of their losses; there was nothing au¬ 
thentic. There were numerous inquiries — great concern on the 
part of people holding policies and credits based on insurance. 
There was a strong pressure to have action taken toward the 
winding up and weeding out, as it was termed, of companies in 
a precarious condition. The pressure was generally that the De¬ 
partment accept the tabulation of losses as valid claim. 

Q. The tabulation made on what basis ? A. The estimates 
we had received in the sworn reports, and also outside informa¬ 
tion. Very frequently we would have inquiries based upon sup¬ 
posed private information of what the management of certain 
companies were doing, and that I would have verified or have 
the report looked up by the He^v York men. 

Q. State whether or not during this period there was much 
uncertainty as to the extent of the losses in San Francisco? A. 
There w 7 as a great deal. 

Q. And what were the particular difficulties in the situation? 
A. Well, there was the impossibility of reaching an accurate 
determination of what the loss w r as and the disposition of the 
companies to minimize the amount of their losses, and the con¬ 
tinually increasing facts developed of the actual condition in San 
Francisco. 

Q. How, any information that you received from the com¬ 
panies, how 7 is that made up? You spoke about the disposition 
on the part of the companies to minimize their losses. In what 
part of their statements did that appear? A. It was principally 
in their first statement — the first estimates; they were away 
below what the result showed. They had no direct returns. They 
could simply offer their best information, as they stated, of what 
their losses would be. 

Senator MoCarren.— Was that during Superintendent Hen¬ 
dricks’ administration, or your own? 





372 


Senate Judiciary Committee. 

The Witness.— The first circular was called for by Superin¬ 
tendent Hendricks. It was issued Hay 12th, after I had been 
appointed and confirmed on the 2d; but I did not take office 
until the 17th, but I was known to be the new incumbent; I was 
in constant communication with the office while occupying the 
comptrollership. 

Q. You speak about the circular. You mean, the information 
which the circular required of the companies ? A. Well, I was 
calling the circular the one that we issued — the statement, the 
estimate. There was a letter sent to each company, enclosing 
blanks and requiring them to make an estimate return; that esti¬ 
mate w r as compiled and put into the circulars of May 12th and 
July 28th. 

Q. How, is there any — were there any cases with reference 
to lost papers or policies ? A. That was practically so with all 
the companies, I think. They had no particulars in a great many 
cases. Their entire agency books w r ere lost in the conflagration in 
some cases. One company, the Dutchess, the officers told me 
had claims presented aggregating $100,000 and over that they had 
not a scratch of a pen to show any such insurance outstanding. 
The companies were protesting that the losses given in the press 
and otherwise were grossly overstated; and those who were un¬ 
certain about the condition of insurance were claiming the losses 
had been minimized, and that not half of it was known. It was a 
panicky condition and we were doing the best we could until we 
could get accurate information. 

Q. Well, and that was the — this condition was the reason 
why you were in constant daily communication with the Hew 
York office ? A. It was. 

Q. The information that was obtained during that period of 

time came from the Hew York office almost exclusively? A. It 

«/ 

did. It would have been an impossibility for me, with the exam¬ 
ining force I had, to have verified the number of companies. It 
would take a couple of years probably to go through in the way 
we usually check back and verify reports, to know where they 
were; and the putting of examiners into a single company might 
have resulted in precipitating the very condition that we were 
trying to avoid. 

Q. What you were seeking to do was to avoid a panic? A. It 
was; and it was stated to me by men to whom I must defer in such 
matters of judgment, that it was imminent. 



Testimony of Mr. Kelsey. 


373 


Q. Will you state from wliat sources your information came 
in that respect ? A. It came from the proprietors of papers — 
insurance papers — and from organizations of business men and 
from prominent business men themselves, as well as from the 
numerous associations of policy-holders and specific companies. 

Q. All complaints or communications for information and all 

such matters came to the Albany office? A. Thev did. 

«/ 

Q. And they were — that correspondence containing or relat¬ 
ing to that matter was a daily occurrence? A. It was. 

Q. And did you communicate the substance of those complaints 
and the necessity for information and ask for information con¬ 
cerning each matter contained in each day’s mail? A. Well, I 
could not say each day’s mail; but the important matters; the 
things about which we had no information and could give no 
direct reply; anything that was new and was developing we would 
ask to have that looked up. 

Q. How frequently did you receive sworn statements from 
these insurance companies? A. Well, the general circulars all 
came in in comparatively short time in response to each call for 
information; but we had reports from different companies where 
we wished to know the condition or desired specific information 
in relation to certain facts, repeatedly. 

Q. How, in the information which was given by these com¬ 
panies, what were you required to guard against in their state¬ 
ments in order to determine what was the actual condition? A. 
We had to guard principally against the amount of loss and the 
amount of salvage and reinsurance matters. 

Q. How, in that respect, take the amount of losses. Was the 
disposition on the part of the companies to minimize the losses or 
to swell them? A. To minimize them. 

Q. That is, to make the losses as low as possible? A. They 
first insisted that their salvage would be a tremendous per cent, 
from our view, and we were inquiring about that. 

Q. Then the next item that appeared in that connection, in 
order to reduce the actual losses of the companies, would appear 
in the amount of salvage? A. What they claimed they would 
realize. 

Q. And was there a tendency in that regard to reduce the 
amount of salvage that would result? or to increase it? A. Why, 
to increase it. One company claimed they would realize 60 per 
cent, of salvage. 




374 


Senate Judiciary Committee. 


By Senator Smith: 

Q. Claimed wlio would realize it ? A. The company itself. 

Q. That is, that there would be saved from the property in¬ 
jured enough to cover sixty per cent, of the losses ? A. They 
claimed they would receive sixty per cent, in salvage, yes. 

By Mr. Hatch: 

Q. How was it as to all of them in respect to that item in the 
statement? A. My recollection would be that practically all of 
them claimed large salvage. There were a few 'that did not, I 
remember, however. 

Q. IIow was it with respect to reinsurance, as to that item? 
A. They all put in the full limit, I think, of what they expected 
to realize from reinsurance. 

Q. That is; from reinsurance in other companies? A. In 
other companies. 

Q. Those three items were the principal items through which 
the companies sought to minimize their losses in that fire ? A. 
Yes, and disputes as to the amount of the losses. 

Q. How, in reaching # conclusion as to whether they were 
stated correctly, in that respect, what did you do — what examina¬ 
tion did you make ? A. Most v of it was by inquiry and w r as 
obtained from the Hew York office. There were a few cases that 
were inquired into directly and examined — the companies. 

Q Well, your standard of inquiry was based upon the report 
of December 31, 1905 ? A. For each company the basis on which 
we made the estimates of the returns under our circular, was with 
the financial report of the preceding December 31st. 

Q. So starting with that, you made an examination of the 
reported condition from time to time, as they came in, with that 
as a standard? A. Yes, the preceding financial statement of 
December 31st. 

Q. What particular duty at that time was performed by Mr. 
\ anderpoel ? A. lie was the chief examiner of the Department. 

Q. What were his relations with the fire insurance companies 
in Hew York? A. He was closely acquainted with the officers of 
all the leading companies. He had been in the Department thirtv 
odd years and knew more or less about the organization and the 
condition and details and affiliations of all the officers of all the 
companies. 





Testimony of Mr. Kelsey. 


375 


Q. Do you know what his method was of acquiring informa¬ 
tion in that respect? A. Only as I gathered it from time to time. 
It was by inquiry among the insurance men and the parties in¬ 
terested in insurance business. 

Q. Well, now, inquiry does not give us a very clear definite 
idea of the situation. What did he do ? A. He had a personal 
acquaintance with them and he went to them and asked for the 
latest advices. 

Q. Well, did he go to one insurance officer and communicate 
to him what he had gathered from another insurance officer, or 
did he go and make separate inquiries of all of these insurance 
officers ? A. I could not say from day to day how he did it. He 
reported to me the facts and they were substantiated subsequently. 
He has told me at different times of going to a single individual 
and then of going out “ on the street,” as he called it, where he 
would meet a dozen important men in the insurance world, and 
he gathered information- from different sources and grasped the 
different threads of information and reports received from other 
adjusters of the business transacted in San Francisco. 

Q. You understood that he kept in touch with the whole insur¬ 
ance world in the city of Yew York ? A. He did. 

Q. And day by day lie reported to you the result of his in¬ 
vestigations on that subject? A. That is true. 

Q. How, state to the Committee whether or not subsequent 
developments showed that the information which he communi¬ 
cated to you from time to time was accurate? A. They did. 

Q. And you acted on that in making it the basis of your ad¬ 
justments and the issuing of circulars from time to time? A. 
1 relied upon it in dealing with the situation. 

Q. And will you state whether or not by actual test of results 
you were, justified in so relying upon such information? A. 
I was. 

Q. Now, that information was collected in that way during 
this whole period of time of which you have spoken ? A. It was. 

Q. Beginning from the time of your accession to the office? 
A. Until about the end of the year. They did not reach a con¬ 
dition of feeling safe or knowing what the situation would fur¬ 
ther develop until about that time, after our last circular which 
was issued in December. 

Q. And you issued a circular, you say, in October? A. It was 
as of the date of October 31st, but it was not issued, I think, 
until about the 7th of December. 


3?G 


Senate Judiciary Committee. 


Q. Is this the circular (handing paper to witness).? A. It is. 

Mr. Hatch.— I offer this in evidence. (Admitted and martked 
Exhibit 115.) 

Q. During this period of time, how frequently were you in 

Hew York ? A. Every week or so. There was no fixed time 

«/ 

for being there. 

Q. Yes, but did a period longer than a week during that time 
elapse ? A. I think there were occasions that there were two 
weeks, but usuallv every week. 

Q. And when in Hew York what did you do ? A. I was at the 
Department. 

Q. AY ell, did you go there and sit down and do nothing ? A. 
Oh, no. 

Q. Well, what did you do? A. I conferred with Mr. Vander- 
poel and Mr. Hunter; at different times I visited different insur¬ 
ance companies. 

Q. What information did you receive from them — Mr. Hunter 
and Mr. Vanderpoel — or either of them upon the occasions of 
vour visits? A. It was in the same line of talking over the whole 
situation and the developments and the prospects. 

Q. With the attempt all the while to arrive at the amount of 
the losses — and in order to — A. It was to be sure that the 
situation did not get away from us. 

Q. (Continuing) and in order to determine the solvency on 
these companies? A. That was all the while a matter of dis¬ 
cussion. 

Mr. Hatch.— How, will you read that circular, General. 

Mr. Mayer read Exhibit 115. 

Mr. Mayer.— How, the circular just read is a further develop¬ 
ment of July 28, 1906, in evidence. In the July circular tin* 
item is estimated salvage. In the December circular the item is 
salvage, the companies by December having in considerable meas¬ 
ure been able to ascertain the actual as distinguished from possible 
salvage. Similarly, as more nearly ascertainable in the December 
circular, the item of net amount unpaid was carried. Also in 
the December circular the column in respect of reinsurance was 

necessarily more accurate-because as the circular has stated, 

in compiling the companies’ returns where credits have been taken 
for reinsurance in unauthorized companies, proper deductions 
have been made by the Department; so that in the December 
circular, under the heading of reinsurance, deductions were made 








Testimony of Mr. Kelsey. 


377 


where there was a reinsurance in companies not authorized to do 

business in the State of New York, and, therefore, the reinsurance 

item is there worked out more accurately. The total — the num- 
• «/ 

her of different headings as developed under December, 1906, 
circular are these (reading headings from circular) : And in 
addition thereto foot notes with special details and information, 
of the same general character, although differing of course in sub¬ 
stance, as the foot notes in the two preceding circulars. 

Q. Did reports come in in response to these circulars? A. 

They did. 

«/ 

Q. And then what was done with those? A. The last circular, 
the replies were audited practically in the same manner that we do 
the financial statement, in the fall. The statistician went through 
them by items and checked them up with the statement. 

Q. Checked them up with what statement? A. The financial 
statement of the preceding December. 

Q. And with the prior reports after the fire? A. Yes; re¬ 
jecting the nonadmitted assets and the unauthorized companies — 
reinsurance. 

Q. Were all questionable items excluded ? A. They were in¬ 
tended to be — were. 

Q. What were these questionable items ? A. Where a com¬ 
pany that had reinsurance in another company that was nor au¬ 
thorized to do business in this State. 

Q. That you rejected? A. Yes, anything that struck our at¬ 
tention as being improper to be allowed as a good asset, or a 
reduction of a liability that ought to be charged. 

Q. And did that relate to the amount of salvage? A. It did; 
it involved correspondence with the companies for the correction 
of these matters. 

Q. Did you at that time or at any time during this period re¬ 
quire the companies to pay in more money ? A. Well, where 
there was any impairment they were required to pay. In most 
cases, where they found themselves becoming injured the man¬ 
agers or stockholders or the' people interested took hold and pro¬ 
vided additional capital. . 

Q. And was that the subject-matter — was that what you 
required them to do? A. We did, or cease business. 

Q. Yes. A. Generally they were anxious to do it themselves. 

Q. Do you know in amount and extent the capital that was 
paid in during this period in addition to what had been fhe capital 





» 


378 Senate Judiciary Committee. 

before? A. In the vicinity of $80,000,000; that is, during the 
entire year — summer and fall. 

Q. That was paid in during that period of time? A. That 

year, yes. 

Q. And that was ail of it fresh money ? A. It was new capital. 

Q. Will you give me the returns in answer to the circular of 
October 31st? 

(Book handed to Mr. Hatch.) 

Q. What book is that, Mr. Kelsey (handing book to witness) ? 
A. It is a book containing the San Francisco losses, special state¬ 
ments, October 31st, for the Hew York State companies, and 
United States branches of foreign companies. 

Q. That is, your supervision covered every company doing 
business in this State ? A. It did; and practically all of the for¬ 
eign companies have United States branches in this State; so 
with those the Department undertook the preparation of the state¬ 
ments for all of our companies and for all the foreign branches. 

Q. The foreign companies are regarded as being domiciled in 
this State? A. They are. 

Q. And the book is what? A. It is the reports from the com¬ 
panies in response to the circular, showing the condition as of 
October the 31st of fire losses. 

Q. Of what year? A. 1906. 

Q. And those returns are the returns which you have spoken 
about that were audited in detail ? A. Yes, from which the Octo¬ 
ber statement was made up that was issued in December. 

Mr. Hatch.— I desire to offer that book in evidence. 

(Admitted and marked Exhibit Ho. 116.) 

Mr. Mayer.— Exhibit Ho. 116 is a book called “ San Francisco 
Losses. Special statements, October 31, 1906. Hew York State 
and United States Board Foreign Fire Companies.” 

Q. Mr. Kelsey, do you know of any other man that could have 
procured and communicated to you the information with respect 
to the status and standing of those insurance companies, aside 
from Mr. Yanderpoel? A. I do not. I think he was the best 
equipped man in the United States. 

Q. And do you know of any other ? A. I do not. 

Q. And from the information which you received from him — 
you found that the information he communicated to you was re¬ 
liable and accurate? A. I did. 

Q. As tested by actual results ? A. That is true. 





Testimony of Mr. Kelsey. 


379 


Q. Did you know whether or not in the history of insurance 
circles respecting fire insurance there has ever been a single 
calamity that equalled that of the San Francisco fire? A. There 
has not been. 

Q. So that the condition, if I understand you, with respect to 
that fire, was a distinctly abnormal condition ? A. It was; un¬ 
precedented. 

Q. And there was great apprehension, was there not, in insur¬ 
ance circles that it would result in the insolvency or refusal to 
pay losses of a great number of companies ? A. There was. It 
was placed by some as high as forty or fifty companies. 

Q. Do you know from your examination about the amount of 
credits of various kinds in the financial world in the city of New 
York which are represented by what are known as insurance 
credits ? A. From the information in response to inquiries which 
I made from time to time. 

Q. You informed yourself upon that subject, did you ? A. I 
endeavored to and did. 

Q. Will you state to the Committee the amount of those credits 
which you discovered ? A. The estimates. varied from five hun¬ 
dred to seven hundred million. 

Q. In which — A. In which the insurance policy is the basis 
of the credit. 

Q. In the various business transactions of the country ? A. Of 
the city. 

Q. You are speaking of the city of Yew York alone ? A. Yes, 
that is entirely New York city. 

Q. Do you know with respect to what they were throughout the 
country at large ? A. I do not. 

Q. They would be very much increased, would they not ? A. I 
should say they would. 

Q. Now, the stability of those credits depended on the con¬ 
tinued solvency of those companies ? A. It depended on that and 
the confidence that was reposed in them. 

Q. And were you informed of that condition during the period 
of that examination and the adjustment of these losses? A. I 
was, repeatedly. 

Q. So you regarded the situation during that whole period as 
very precarious? A. As grave, exceedingly so. Any slight act 
might have precipitated a catastrophe. It was a matter that could 
not be even discussed in the press officially. 


380 


Senate Judiciary Committee. 


Q. And in this whole matter, what you set out to do in con¬ 
nection with this condition was to keep in daily touch with that 
situation? A. I did. Not to precipitate trouble; to keep close 
enough watch not to be at fault in case calamity followed. 

Q. And to see that the law of the State was observed ? A. It 
was to protect the companies as well as the insuring public. 

Mr. Hatch.— Will you give me Exhibit No. 83? 

Q. I show you this bundle of papers (handing papers to wit¬ 
ness) ; to what does that relate? A. Correspondence in relation 
to the San Francisco conflagration. 

Q. Between what period? A. It is between the time I took 
offlce and December, as I take it. 

By Senator McCarren: 

Q. Was there any other method by which you could procure 
the information as to the solvency or insolvency of these fire com¬ 
panies that you required, other than through the medium of Mr. 
Vanderpoel? A. Well, there were our own efforts, Senator, so 
far as the correspondence went, and our judgment upon the reports 
and inquiries that came to us; but as supplementing that and as 
something I could rely upon to print the schedule, between the 
rumors that were coming, I relied upon the information that Mr. 
Vanderpoel could obtain, and I knew of nobody that, could sup¬ 
plant him. 

By Mr. Hatch: 

Q. And now, after the rumors are over, do you know of any 
person that could supplant him ? A. I do not. Most of it de¬ 
pended on Mr. Vanderpoel, although I communicated with Mr. 
Hunter sometimes also. 

By Senator McCarren: 

Q. Was it not a question of mutual confidence between the 
agent representing your Department and the companies? A. It 
was. A stranger could not have gone to the big insurance people 
or business circles or associations and received any confidence at 
all. If I sent an ordinary clerk he would not be able to get in 
where he could see the president or other officer. 


.Testimony of Mr. Kelsey. 


381 


By Mr. Hatch: 

Q. If you sent a new man with the authority of an examiner, 
then what? A. You mean to examine the company? 

Q. No; I do not mean to exercise the duties of an examiner 
under the law, but to get information? A. Oh, he couldn’t do 
it. They were not willing to be quoted for the information that 
was given in confidence. It was the inside suggestion of what 
had developed and what they thought was likely to. 

By Senator Smith: 

Q. When Mr. Vanderpoel was engaged in the work of prose¬ 
cuting these inquiries, would he go to a company and inquire 
of the officials of that company about that company alone ? A. 

Oh, no. 

Q. Or would he discuss with the officers of that company the 
general fire insurance situation and the conditions of other com¬ 
panies ? A. \ r es. The sources of his information were almost 
invariably with the companies that were rock proof — the com¬ 
panies that were beyond any suspicion. The officers there had 
a general view of the situation and knew the details of the smaller 
companies, those under suspicion, by reason of their intercourse 
with them. 

Q. And he would discuss with those officers of those companies 
which you term as “ rock proof,’’ the condition of other com¬ 
panies, confidentially ? A. Yes, and the conditions prevailing not 
only in this State but in other States. 

Q. The general conditions in the fire insurance world ? A. Yes, 
it was a matter of intense interest and was being discussed all 
the time. 


By Mr. Mayer: 

Q. And would Mr. Vanderpoel ascertain special facts and in¬ 
formation from one company in reference to some other com¬ 
pany ? A. He did. ITe would get reports frequently from half a 
dozen sources, sift them out and give a general opinion and esti¬ 
mate as to what was the situation. 

By Mr. Hatch: 

Q. Now, his ability to obtain that information was personal 
to himself, was it not? A.- It was. _ _ _ 


382 


Senate Judiciary Committee. 


Q. And that is the reason why you say that a stranger or no 
other person you could send could have acquired that information ? 
A. They could not, I am satisfied. 

By Senator Smith: 

Q. In what way would the officials of one company obtain in¬ 
formation as to the conditions prevailing in another company ? 
A. I would not know, Senator, in detail; but it was a little like 
the gossip of business affairs in any town. The prominent business 
men knew the general conditions, and by reason of applications 
or interviews — frequently appeals for assistance or advice — they 
seemed to know or did know in a great many instances the inside 
workings of other companies. 

Q. It is true, is it not, that in cases of loss the proofs of loss — 
in the case of fire insurance, I am speaking — the proofs of loss 
submitted to one company are submitted to all other companies 
that have insurance on that property ? A. That is true. 

Q. And in that way one company would be possessed of infor¬ 
mation as to the facts of the other companies ? A. That is true. 

By Mr. Hatch: 

Q. Mr. Yanderpoel himself had this information by reason of 
his experience, did he not ? A. He did to a large extent. 

Q. That is, he knew the standing of all these companies ? A. 
He did. 

Q. And as they stood in the insurance world ? A. Yes, sir. 

Q. Whether they were strong or weak? A. Yes. 

Q. This information which you say that he obtained was in¬ 
formation that Was private and confidential, was it not? A. It 
was. 

Q. And that information which was received during this critical 
period was not given to the public ? A. It was not. 

Q. And it did not find its way into the newspapers ? A. It 
did not. 

Q. And did the information which you thus received enable 
you to deal with these companies so as to see that they remained 
solvent and still discharged their duties under the law and were 
in such condition as to protect the policy-holders ? A. It did. 

Q. And has that condition been justified by the actual results 
which flowed from the situation in that course of procedure? A. 




Testimony of Mb. Kelsey. 


383 


. It has, in my opinion. There is a reference to that in my pre¬ 
liminary text — the fire insurance situation. 

Q. We have spoken, Mr. Kelsey, in this situation of the service 
of Mr. Vanderpoel? A. Yes, sir. 

Q. What service did Mr. Hunter perform during the same 
period ? A. It was practically the same but not to an equal degree. 

Q. Along the same lines ? A. He had been for ten years in the 
Department and was very familiar with the business situation; he 
had a wide acquaintance, but among a different class of people, 
financial men and others, than Mr. Vanderpoel. 

Q. Will you state to the Committee the particular things that 
Mr. Hunter did during that period ? A. His service was practi¬ 
cally of the same character — response to inquiries and looking 
up specific instances when called to his attention. 

Q. So he gathered information from other sources in like 
manner as Mr. Vanderpoel gathered from the sources which you 
have described? A. Yes. 

Q. State whether or not the information which Mr. Hunter 
obtained and communicated to you you discovered by actual test 
to be reliable and accurate ? A. It was. 

Q. Did it furnish the basis of your action ? A. It did, in con¬ 
nection with Mr. Vanderpoel’s reports. 

Q. You took all this information and made it the basis of your 
action in dealing with that situation ? A. I did. 

Q. Do you know what Mr. Hunter’s connection was with expert 
writers upon insurance journals? A. I know he was acquainted 
with most of the insurance papers there. 

Q. And do you know whether he gathered information from 
that source ? A. He told me that he did. 

Q. And he communicated to you the information that he had 
so gathered? A. He did. 

Q. And you made it the basis of your action ? A. I did, in 
connection with the other. 

Q. How, state what else they did? A. They carried on the 
ordinary business routine work of the office acceptably, where my 
attention was entirely absorbed in other matters; and it would 
have been difficult to replace them with new men under the cir¬ 
cumstances. 

Q. Did you know where you could find men to replace them 
with? A. I did not. 

Q. Do you know now? A. I do not. I am having extreme 
difficulty trying to fill the position. 



384 


Senate Judiciary Committee. 


Q. What position ? A. That of examiner. 

Q. That is, Mr. VanderpoeTs position? A. Yes, sir. 

Q. Have you been able up to this time to find a man to fill it ? 
A. I have not. 

Q. Do you know whether a civil service examination has been 
held for the purpose of filling it ? A. It has. 

Q. How many took that examination ? A. About a dozen, I 
think. 

Q. And with what result ? A. The result is not yet deter¬ 
mined. 

Q. The result is not yet determined, but the examination has 
been held, has it ? A. It has. It is different than the ordinary 
clerical examination. -They have forwarded to the State Civil 
Service Commission their record, their experience, age, and have 
written, I think, a thesis upon the various forms of insurance ex¬ 
aminations. The State Civil Service Commission has informally 
furnished me with a list of the names, with a view of deciding 
upon the form of inquiry that shall determine the selection. 

Q. Do you know whether from out of that list there is one man 
that possesses the necessary information or ability to fill the situa¬ 
tion equal to Mr. Vanderpoel or Mr. Hunter? A. I don’t think 
there is one of them. 

Q. Do you know whether there is one of them who, in your 
judgment, would be able to fill the situation ? A. I very much 
doubt it. 

By Senator McCarren: 

Are both places vacant ? A. Both, but the position of deputy 
is outside of the list. That can be filled; but Mr. VanderpoeTs 
position is under the classified civil service. 

By Senator Smith: 

Q. What do you mean by saying it can be filled? A. That I 
have the power to fill it. 

Q. Has the Superintendent in mind or has the Superintendent 
been able to discover a person to fill that position of the same 
ability as was displayed by Mr. Hunter in that position? A. I 
have not. 

By Senator McCarren: 

Q. How is the work that was formerly done by these two men 
being performed now ? A. I Lave detailed one of the oldest and 


Testimony of Mr, Kelsey. 


385 


most reliable examiners, Mr. Gordon, to take charge of the office, 
and in connection with the directions from the Albany office and 
my attendance there every few days, we are working along tem¬ 
porarily. 

$ • 

\ 

By Mr. Hatch: 

Q. Is there any such critical condition existing now in insurance 
circles as existed at the period of which you have spoken ? A. Not 
at all; not a shadow of it. 

Q. The main business of the office at this time is what ? A. It 
is the routine work. Examinations, verifications of capital state¬ 
ments, examinations on the organization and the usual run of 
business. 

Q. And the increase and decrease of capital stock? A. Yes, 
all of those things. 

Q. Those are matters which come up in the routine of the busi¬ 
ness of the Department? A. All the time, yes. 

Q. And that is — there is at this time, neither in fire nor life 
insurance circles any aggravated condition ? A. Not to my knowl¬ 
edge. 

Q. Well, you know, do you not ? A. I do. 

Q. What is required now ? Is there anything beyond the super¬ 
vision of existing conditions? A. Not any extraordinary service. 

Q. Is there anything that you can do beyond the supervision of 
existing conditions, unless the Legislature adopts the suggestions 
'which you have made in your report and amend the law? A. Not 
very much — the ordinary administration. There are features in 
relation to certain companies that I expect to take up and have 
settled in the immediate future. Just at present the entire situa¬ 
tion is a little in abeyance. I am not able to proceed as effectually 
or energetically with it as I should like to. 

Q. For what reason ? A. For the reason that my head is sup¬ 
posed to be in jeopardy. 

Q. This situation here has somewhat disturbed the equanimity 
of your office? A. Naturally, yes. 

Q. Is there any critical situation now in insurance circles or in 
connection with your Department.? A. There is not. 

Q. Do you know of any particular in which the Armstrong In¬ 
surance Law, so-called, has not been carried out and its provisions 
met during your administration? A. I do not. I have held as 
closely to the line as I possibly could. 

25 


386 


Senate Judiciary Committee. 


Q. Is there a single provision of that law that has not been put 
in force by you ? A. I am not aware of any that should be in force 
up to this time. 

Q. Have you ever in the course of your administration of the 
Insurance Law and what you have done, both under the Armstrong 
law and the old law, heard any criticism of your administration 
save that which has resulted in this present proceeding? A. I 
have not — aside from newspaper comment. 

Q. Yes. I leave that out, because we are not responsible for 
that. In this connection, Mr. Kelsey, and having regard to Mr. 
Vanderpoel’s position, have you made inquiries in any other State 
outside of New York for a man sufficiently equipped to fill his 
place ? A. I have. 

Q. Where ? A. In Massachusetts. 

Q. Anywhere else ? A. I have had no direct communication, I 
have made inquiry in Ohio, Michigan and Illinois. 

Q. And for what purpose? A. For the purpose of finding a 
man of the requisite ability and experience to take that respon¬ 
sible position. 

Q. The Massachusetts man that you had in mind was whom? 
A. Mr. Fletcher. 

Q. And who was Mr. Fletcher? A. He was formerly con¬ 
nected with the Maine Department, and is now the examiner — I 
think — the chief examiner, perhaps it is a combination of actuary 
and examiner, of the Massachusetts Department. 

Q. Insurance Department ? A. Insurance Department — 
State. 

Q. And the State Insurance Department of the State of 
Maine ? A. He was connected with that, so I have been informed. 

Q. Now, is Mr. Fletcher the Mr. Fletcher you mentioned as 
being here in one of the consultations over the gain and loss 
statement? A. I met him here in Albany. Hie was a member 
of the subcommittee on blanks. He remained over two or three 
days in assisting to perfect the blanks. 

Q. That is the same Mr. Fletcher? A. Yes. 

Q. What communication did you have with him with respect 
to his taking the civil service examination in this State? A. I 
inquired whether if an appointment were offered him he would' 
be willing to enter the examination and take his chances upon 
securing a rating that would enable me to appoint him. 

Q. And what reply did you receive from him in response to 



Testimony of Mk, Kelsey. 


387 


mat proposition ? A. lie considered it and advised me that he 
would accept it under certain conditions. 

Q. And those conditions were such as you could comply with 
under the law ? A. They were. 

Q. And did you expect that he would enter this examination 
which has been held ? A. I did. I also expected that Mr. 
Hadley, of Michigan, and Mr. Stilwell, of Ohio, would enter. I 
hoped they might. They were sent copies of the announcement 
of the examination. 

Q. And for the same purpose? A. For the/same purpose. 

Q. Did you receive any communication from Mr. Fletcher 
with respect to whether or not he would take the examination? 
A. I did not in writing. 

Q. Verbally? A. Through a telephone communication to my 
assistant. 

Q. Did he come on and take the examination ? A. He did not. 

Q. Why? A. Under certain circumstances he said he did not 
care to, or under the existing conditions. 

Q. And the existing conditions were those conditions which 
resulted in these proceedings? A. That would be only an in¬ 
ference on my part. He did not come I know. 

Q. He did not take the examination ? A. He did not. 

Q. Did any of the other gentlemen take it ? A. They did not. 

Q. I ask you the general question, have you up to this time, 
Mr. Kelsey, been able to find a man who could fill the position 
which was occupied by Mr. Vanderpoel ? A. I have not. 

Q. Or do you know where there is one, aside from these 
gentlemen that you have named ? A. I do not. 

By Senator McCarren: 

Q. Do you think any of the subordinates in your Department 
could fill the position ? A. I do not. They are good men, but 
they have not had the experience in taking sole charge of matters 
and dealing with the officers of companies and dealing with the 
different methods of keeping hooks, statements of investments, 
etc. They perhaps can he worked into it; that I do not know yet. 

By Mr. Hatch: 

Q. This position is substantially a profession, is it not, Mr. 
Kelsey? A. It is specialized. 


388 


Senate Judiciary Committee. 

Q. And such knowledge is essential, is it not, in order that 
the Department may be advised of the actual condition of the 
companies ? A. To proceed with any safety, it is. 

Q. During this period of which you have spoken, did you re¬ 
ceive advice and suggestions from business men in New York 
with respect to these insurance companies ? A. I did. 

Q. You spoke about - A. That is the correspondence 

(indicating). 

Mr. Hatch.— I desire to introduce that in evidence. 

Mr. Mayer.— That is a package of various papers relating to 
correspondence in respect to the particular companies which I 
shall name, and all having to do with the working out of the 
problem in connection with these companies arising out of the 
San Francisco conflagration. 

Mr. Mayer then read a list of the names of the various com¬ 
panies to which the correspondence referred to relates, and the 
several packages containing said correspondence were admitted 
in evidence and marked as follows: 

Fidelity Fire Insurance Company, 

Admitted and marked Exhibit 117. 

National Lumber Insurance Company, 

Admitted and marked Exhibit 117-a. 

Rossi a Insurance Company, 

Admitted and marked Exhibit 117-b. 

Salamandra Insurance Co., 

Admitted and marked Exhibit 117-c. 

The Lancashire of Manchester, Eng., 

Admitted and marked Exhibit 117-d. 

Moscow Fire Ins. Co. of Moscow, Russia, 

Admitted and marked Exhibit 117-e. 

Scandia Insurance Co. of Stockholm, Sweden, 

Admitted and marked Exhibit 117-f. 

The Thuringia Insurance Co. of Erfurt, Germany, . 

Admitted and marked Exhibit 117-g. 

Royal Insurance Company, 

Admitted and marked Exhibit 117-h. 

The Netherlands Fire Insurance Co., Hague, Holland, 
Admitted and marked Exhibit 117-i. 

The Continental Insurance Co., 

Admitted and marked Exhibit 117-j. 



Testimony of Me. Kelsey. 


J lie Continental Insurance Co., 

Admitted and marked Exhibit 117-k. 

Eagle Eire Insurance Co., 

Admitted and marked Exhibit 117-1. 

E. S. Fire Insurance Co. of New York, 

Admitted and marked Exhibit 117-m. 

Commercial Union Fire Insurance Co. of New York, 
Admitted and marked Exhibit 117-n. 

North German Eire Insurance Company of New York, 
Admitted and marked Exhibit 117-o, 

Pacific Fire Insu ranee Co., 

Admitted and marked Exhibit 117-p. 

Hamilton Eire Insurance Co., 

Admitted and marked Exhibit 117-q. 

Caledonian American.Ins. Co., 

Admitted and marked Exhibit 117-r. 

North River Insurance Co., 

Admitted and marked Exhibit 117-s. 

Yictoria Eire Insurance Co., 

Admitted and marked Exhibit 117-t. 

Empire City of New York, 

Admitted and marked Exhibit 117-u. 

Stuyvesant Insurance Co. of New York, 

Admitted and marked Exhibit 117-v. 

Northern Insurance Co. of New York, 

Admitted and marked Exhibit 117-w. 

Westchester Fire Insurance Co. of New York, 

Admitted and marked Exhibit 117-x. 

Union Eire Insurance Co. of Buffalo, 

Admitted and marked Exhibit 117-y. 

Home Insurance Co., 

Admitted and marked Exhibit 117-z. 

Lafayette Fire of New York, 

Admitted and marked Exhibit 117-aa. 

Williamsburgh City Fire Ins. Co. of New York, 
Admitted and marked Exhibit 117-bb. 

The Commonwealth Insurance Co. of New York, 
Admitted and marked Exhibit 117-cc. 

Assurance Company of America, 

Admitted and marked Exhibit 117-dd. 

Greenwich Insurance Co., 

Admitted and marked Exhibit 117-ee. 


389 


0 


390 


Senate Judiciary Committee. 


Buffalo German Insurance Co., 

Admitted and marked Exhibit 117-ff. 

Germania Fire Insurance Co., 

Admitted and marked Exhibit 117-gg. 

New York Fire, 

Admitted and marked Exhibitrl 17-hh. 

German-American Insurance Co., 

Admitted and marked Exhibit 117-ii. 

Commerce Insurance Co., Albany, N. Y., 
Admitted and marked Exhibit 117-jj. 

Buffalo Commercial Insurance Co., 

Admitted and marked Exhibit 117-kk. 

Albany Insurance Co., 

Admitted and marked Exhibit 117-11. 

Peter Cooper Eire Insurance Co., 

Admitted and marked Exhibit 117-mm. 

City of New York Insurance Co., 

Admitted and marked Exhibit 117-nn. 

The Nassau Eire Insurance Co. of Brooklyn, 
Admitted and marked Exhibit 117-oo. 

Pelican Assurance Co., 

Admitted and marked Exhibit 117-pp. 

Plienix Insurance Co. of New York, 

Admitted and marked Exhibit 117-qq. 

Agricultural Insurance Co. of Watertown, 
Admitted and marked Exhibit 117-rr. 

Hanover Eire Insurance Co., 

Admitted and marked Exhibit 117-ss. 

Indemnity Eire of New York. 

Admitted and marked Exhibit 117-tt. 

Glens Falls Insurance Co., 

Admitted and marked Exhibit 117-uu. 

Globe and Butgers Eire, 

Admitted and marked Exhibit 117-vv. 

Colonial Assurance Co. of City of New York, 
Admitted and marked Exhibit 117-ww. 

Queen Insurance Co. of America, 

Admitted and marked Exhibit 117-xx. 

The Niagara Eire Insurance Co.,* 

Admitted apd marked Exhibit 117-vy. 

Bochester German Insurance Co., 

Admitted and marked Exhibit 117-zz, 


Testimony of Mr. Kelsey. 


391 


British America Insurance Co. of Kew York, 
Admitted and marked Exhibit 117-aaa. 
Queen Insurance Company of America, 

Admitted and marked Exhibit 117-bbb. 
Lumber Insurance Co., 

Admitted and marked Exhibit 117-ccc. 
Munich Be-Insurance Co., 

Admitted and marked Exhibit 117-ddd. 
Union Insurance Co. of Pa., 

Admitted and marked Exhibit 117-eee. 
Colonial Fire Insuarance Co., of Wash., 
Admitted and marked Exhibit 117-fff. 
Firemen’s Fund Ins. Co., Cal., 

Admitted and marked Exhibit 117-ggg. 
Uew Brunswick Fire Insurance Co., K. Y., 
Admitted and marked Exhibit 117-hhh. 
German Insurance Co. of Freeport, 

Admitted and marked Exhibit 117-iii. 
German Fire of Peoria, 

Admitted and marked Exhibit 117-jjj. 
United Firemen’s, Phila., 

Admitted and marked Exhibit 117-kkk. 
Virginia Eire and Marine of Va., 

Admitted and marked Exhibit 117-111. 
Kewark Eire of Hew Jersey, 

Admitted and marked Exhibit 117-mmm. 
Calumet Int. Co. of Chicago, % 

Admitted and marked Exhibit 117-nnn. 
Security Ins. Co., Hew Haven, 

Admitted and marked Exhibit 117-ooo. 
American Ins. Co., Boston, 

Admitted and marked Exhibit 117-ppp. 
Home Fire & Marine, Cal., 

Admitted and marked Exhibit 117-qqq. 

Citizens of Mo.,. 

Admitted and marked Exhibit 117-rrr. 
Star Fire of Ky., 

Admitted and marked Exhibit 117-sss. 

Camden Eire of U. J., 

Admitted and marked Exhibit 117-ttt. 

American Central of Mo., 

Admitted and marked Exhibit 117-uuu, 


392 


Senate Judiciary Committee. 


American Fire of Phila., 

Admitted and marked Exhibit 117-vvv. 
St. Paul Eire & Marine, 

Admitted and marked Exhibit 117-www. 
Granite State Eire, 

Admitted and marked Exhibit 117-xxx. 
National Fire, Hartford, 

Admitted and marked Exhibit 117-yyy. 
Mechanics of Pkila., 

Admitted and marked Exhibit 117-zzz. 
Insurance Co. of North America, Pa., 

Admitted and marked Exhibit 117-ab. 
Mercantile F. & M. of Boston. 

Admitted and marked Exhibit 117-ac. 
Milwaukee Fire of Wis., 

Admitted and marked Exhibit 117-ad. 
Indianapolis Fire, 

Admitted and marked Exhibit 117-ae. 
Mechanics & Traders of New Orleans, 

Admitted and marked Exhibit 117-af. 
Milwaukee Mechanics of Wis., 

Admitted and marked Exhibit 117-ag. 
Springfield Fire & Marine, Mass., 

Admitted and marked Exhibit 117-ah. 
American of Newark, 

Admitted and marked Exhibit 117-ai. 
The Phoenix Assurance,^London, 

Admitted and marked Exhibit 117-aj. 
Liverpool & London & Globe of Eng., 

Admitted and marked Exhibit 117-ak. 
Hamburg Bremen Fire, 

Admitted and marked Exhibit 117-ai. 
British America Assurance Co., Toronto, 
Admitted and marked Exhibit 117-am. 
Aachen & Munich Fire Insurance Co., 

Admitted and marked Exhibit 117-an. . 
Palatine of London, 

Admitted and marked Exhibit 117-ao. 
Boyal of Liverpool, 

Admitted and marked Exhibit 117-ap. 
Lake Union and Crown, 

Admitted and marked Exhibit 117-aq, 


Testimony of Mr. Kelsey 

. / 

Union Assurance Society, London, 

Admitted and marked Exhibit 117-ar. 

North British & Mercantile, London. 

Admitted and marked Exhibit 117-as. 

Western Assurance Co., 

Admitted and marked Exhibit 117-at. 

London & Lancashire Fire, 

Admitted and marked Exhibit 117-au. 

Alliance Assurance, London, 

Admitted and marked Exhibit 117-av. 

Cologne Be-Insurance Co., 

Admitted and marked Exhibit 117-aw. 

Koyal Exchange Assurance, 

Admitted and marked Exhibit 117-ax. 

Atlas Assurance, London, 

Admitted and marked Exhibit 117-av. 

«/ 

London Assurance Corporation, 

Admitted and marked Exhibit 117-az. 
Transatlantic Eire, 

Admitted and marked Exhibit 117-bl. 
Svea Eire & Life, 

Admitted and marked Exhibit 117-1)2. 
Sun Insurance Office, 

Admitted and marked Exhibit Il7-b3. 
Scottish Union & National, 

Admitted and marked Exhibit Il7-b4. 
Northern Assurance, London, 

Admitted and marked Exhibit Il7-b5. 
Commercial Union Assurance, London, 
Admitted and marked Exhibit 117-1)6. 
Caledonian, Edinburgh, 

Admitted and marked Exhibit 117-b7. 
Norwich Union Fire Ins. Society, 

Admitted and marked Exhibit 117-b8. 
Equitable Eire & Marine, 

Admitted and marked Exhibit Il7-b9. 
Eire Association of Phil a., 

Admitted and marked Exhibit 117-blO. 
Farmers Fire of York, Pa., 

Admitted and marked Exhibit 117-bl 1. 
Spring Garden Insurance Co., 

Admitted and marked Exhibit 117-bl 2. 


394 


Senate Judiciary Committee. 


Standard Fire of H. Y. 

Admitted and marked Exhibit 117-1)13. 
Georgia Home Insurance Co., 

Admitted and marked Exhibit Il7-bl4. 
German American Eire of Maryland, 

Admitted and marked Exhibit Il7-bl5. 
German Eire of Pittsburgh, 

Admitted and marked Exhibit Il7-bl6. 
German Fire of Wheeling, W. Ya., 

Admitted and marked Exhibit Il7-bl7. 
Girard Fire & Marine, Phila., 

Admitted and marked Exhibit Il7-bl8. 
Granite State Fire, 

Admitted and marked Exhibit Il7-bl9. 
Hartford Fire Ins. Co., 

Admitted and marked Exhibit Il7-b20. 
The Insurance Co. of State of Pennsylvania, 
Admitted and marked Exhibit Il7-b21. 
Capital Fire of Concord, H. II., 

Admitted and marked Exhibit Il7-b22. 
Hew Hampshire Fire Ins. Co., 

Admitted and marked Exhibit Il7-b23. 
Humboldt Fire of Allegheny, Pa., 

Admitted and marked Exhibit Il7-b24. 
Metropolitan Fire of Chicago, 

Admitted and marked Exhibit Il7-b25. 
Western Ins. Co. of Pittsburgh, 

Admitted and marked Exhibit Il7-b26. 
German Alliance of Hew York, 

Admitted and marked Exhibit 117-b27. 
Allemannia Fire of Pittsburgh, 

Admitted and marked Exhibit 117-b28. 
Alliance Ins. Co. of Phila., 

Admitted and marked Exhibit 117-b29. 
Atlanta-Birmingliam Fire, 

Admitted and marked Exhibit Il7-b30. 

« 

Ben Franklin of Allegheny, 

Admitted and marked Exhibit 117-b31. 
Hational of Allegheny, 

Admitted and marked Exhibit Il7-b32. 
HCtna Ins. Co. of Hartford, 

Admitted and marked Exhibit 117-b33. 


Testimony of Mr. Kelsey. 


395 


Boston Ins. Co., 

Admitted and marked Exhibit 1174)34. 
Franklin Fire of Phila., 

Admitted and marked Exhibit 1174)35. 
Traders Ins. Co. of Chicago, 

Admitted and marked Exhibit 1174)36, 
Michigan Fire and Marine, 

Admitted and marked Exhibit Il7-b37. 
Lumbermen’s Ins. Co., 

Admitted and marked Exhibit 1174)38. 
The Pennsylvania Fire Ins. Co., 

Admitted and marked Exhibit 1174)39. 
Orient Ins. Co. of Hartford, 

Admitted and marked Exhibit 1174)40. 
Columbia Ins. Co. of FT. J., 

Admitted and marked Exhibit 1174)41. 
Northwestern National of Milwaukee, 

Admitted and marked Exhibit 1174)42. 
Connecticut Fire of Hartford, 

Admitted and marked Exhibit 1174)43. 
Eastern Fire of Atlantic City, N. J. 

Admitted and marked Exhibit 1174)44. 
Delaware Ins. Co. of Phila., 

Admitted and marked Exhibit 1174)45. 
County Fire Ins. Co. of. Phila., 

Admitted and marked Exhibit 1174)46. 
Concordia Fire of Milwaukee, 

Admitted and marked Exhibit 1174)47. 
Detroit Fire and Marine Ins. Co., 

Admitted and marked Exhibit 1174)48. 
Firemen’s Ins. Co. of Newark, 

Admitted and marked Exhibit 1174)49. 
Phoenix Ins. Co. of Hartford, 

Admitted and marked Exhibit 1174)50. 
National Union Fire of Pittsburgh, 

Admitted and marked Exhibit 1174)51. 
Security Fire Baltimore, 

Admitted and marked Exhibit 1174)52. 

Dutchess Ins. Co., 

Admitted and marked Exhibit 1174)53. 


Senate Judiciary Committee. 


306 

By Mr. Hatch: 

Q. That all relates to the San Francisco fire, as I understand ? 
A. It does. It is correspondence with these companies with rela¬ 
tion to their statements and to the fire. 

Mr. Mayer.— Out of this large bundle we have selected just 
one very brief letter to give an idea of the character of the cor¬ 
respondence and the delicate character of it — for instance, a 
letter from the Superintendent to the assistant secretary of a cer¬ 
tain insurance company (reading)-— u We have your special state¬ 
ment, made as of October 31, 1906, and beg to ask that you send 
us the names of the companies involved in the item at line eleven 
of ledger assets.” 

To which the company answers, addressing the Superintendent, 
“ Private and Confidential ” as follows: 

“ We duly received your esteemed favor of the 14th inst. and 
beg to furnish you below with the names of the companies re¬ 
quired: Firemen’s Insurance Company, Hewark; National Fire 
Insurance Company, Hartford; Traders Insurance Company, 
Chicago; Royal Exchange Assurance, Hew York.” 

The answer of the Superintendent, under date of Ho vein her 
20, 1906, is as follows: 

“ We have your letter of the 19th marked ‘ Private and Con¬ 
fidential,’ containing a list of companies included in your asset 
item at line eleven thereof. Be so kind as to state the amount 
owed by the Traders to your company. This company, being in 
the hands of a receiver, we cannot allow this credit at more than 
fifty per cent, of its face value; consequently we shall make the 
deduction from your assets, upon receipt of advices from you as 
to the amount.” 

By Mr. Hatch: ■ ' 

Q. Go back just a little, Mr. Kelsey, to Mr. Yanderpoel and 
Mr. Hunter again. Did you have a talk with Mr. Hunter and 
with Mr. Yanderpoel about their resignations, leaving the De¬ 
partment? A. Yes, sir, I did. 

Q. When was that? A. It was not at the same time; but at 

different dates within a short time after I took office-perhaps 

six weeks. 

Q. With whom did you have your first conversation ? A. The 
first one was with Mr. Hunter. 





Testimony of Mr. Kelsey. 


397 


Q. And what was that? A. He said that at any time I was 
ready for his resignation, it would he forthcoming; that if there 
was to be any resigning, he wanted to attend to it. I told him 
that for the present I wanted him to continue, and that I would 
let him know when the time arrived. 

Q. What was the date of that conversation ? A. It was early 
in the summer; I could not fix the exact date. 

Q. Well, about what time, as nearly as you are able to state? 
A. I should think it was in July. 

Q. Did you have any further conversation with him at any 
time? A. He spoke to me again in August; that, I think, was 
the second of August. 

Q. What was the conversation at that time? A. It \Yas practi 
cally the same thing, a suggestion on his part and an inquiry as 
to whether I wanted his resignation. 

Q. And wdiat did you say ? A. I told him that I was not yet 
ready; that the matters in charge were too important and that 
I could not make the change just then. 

Q. Well, did you have any conversation with him after that 
time ? A. I did. In October he made a formal verbal tender 
of his resignation; I think that was the 8tli of October. 

Q. What was said at that time ? A. He said that he Avas 
making other arrangements and was ready to withdraw from the 
Department. 

Q. What reply did you make to that? A. I told him that 
I was not ready to fill the place and that his services, until we 
got matters straightened out, were important and I wished him 
to continue. The reason I fixed the date, Judge, is that I had 
followed the provision of the statute cutting off the allowance for 
expenses to heads of departments and applied the same rule co 
him. He formerly had five thousand salary and an allowance 
for expenses. 

Q. An allowance of Iioav much for expenses ? A. Tie had 
twenty-three hundred dollars under the former administration. 
I told him I A\ T ould have to take that off entirely. 

Q. Yes; and what did he say to that ? A. It was in connection 
with that conversation that he made a tender of his resignation. 

Q. Did he state anything further Avith respect to that? A. 
Well, he said he would stay while I wanted him. 

Q. State whether or not the appropriation contained in that 
bill Avould have authorized you to pay the $2,300? A. It Avould. 


398 


Senate Judiciaky Committee. 


Q. But you struck that item out because- A. I followed 

the direction of the statute, as I understand it, that there should 
be no allowances in lieu of expenses; that while he was in New 
York, that being his home office, he was to take care of himself. 
If he was sent a wav from New York on official business, of course 
he would be allowed his expenses the same as I would. 

Q. You treated him as a resident of New York? A. Yes. 
His official residence is in New York, as deputy. He is assigned 
to work in that office. 

Q. Did you have any further conversation with him ? 

By Senator Smith: 

Q. You sav that on October 8th, when von had a talk with him, 
he said he would stay as long as you wanted him, \yas there any¬ 
thing said by you to him on that occasion, as to how long you 
thought you might require his services or how long you would 
want him ? A. Only as I stated, until we got matters straight¬ 
ened-out. 

By Mr. Hatch: _ 

Q. To what matters did you refer? A. The San Francisco 
situation. 

By Senator Smith: 

Q. Did you so state to him ? A. I cannot say that I used those 
exact words, but we were discussing the general situation. 

By Mr. Hatch: 

Q. And that was the subject-matter to which your conversations 
had particularly related ? A. Yes. 

By Senator Page: 

Q. I understand, Mr. Ivelsey, that he offered you his resigna¬ 
tion when you notified him that the expense account would be 
cut off? A. It was about that time; lie tendered it then, but he 
had said before that he was willing to withdraw; he did not 

manifest any ill-feeling on that account. He understood tin- 
reason for it and acquiesced in it. 



r 


Testimony of Me. Kelsey. 399 

By S'enaior Smith: 

/ 

Q. Was liis resignation predicated upon the fact that the ex- 
pense allowance which had theretofore been allowed to him was 
in the future not to be allowed ? A. No, he did not say for that 
reason; although he did say it would be money out of his pocket 
for him to hold the position. 

By Mr. Hatch: 

Q. Did you have any other conversation with him? A. Not 
until January. 

Q. Of this year ? A. Of this year. I had other conversations 
with him, but not in relation to this subject. 

Q. I mean in relation to his leaving the Department. A. Yes, 
I so understood you. 

Q. Well, in January of this year, what occurred? A. I don’t 
know how the conversation started. It was in the New York 
office. He reminded me of having tendered his resignation, which 
he had spoken of in October, and he said he was going to send 
me a written resignation. I told him to do so, and we would 
arrange the date for the 1st of February, or about that, I think. 
Subsequently it was moved on to the 1st of March. 

Q. Was that before the Governor had asked for your resigna¬ 
tion ? A. It was. 

Q. And then it was-- A. Three weeks before. 

Q. And then it was postponed to what time ? A. In the adjust¬ 
ment it was fixed at the 1st of March. I could not remember 
just when it was done. 

Q. Did he leave the Department on the 1st of March ? A. He 
did. He tendered his resignation a couple of weeks before, I 
think. 

Q. And was it accepted by you ? A. It was. 

Q. At the time when you had the conversation with him as to 
the last renewal of his resignation, the San Francisco losses had 
been substantially adjusted, had they not ? A. No, they were 
not entirely adjusted; but we knew where we were. We had the 
October statement and the December statement, so we had two 
additional reports on the condition. 

Q. What was the situation in January when you had the talk 
with him at that time, with respect to the adjustment of the con¬ 
dition of the San Francisco losses? A. Well, the business was 





400 


Senate Judiciary Committee. 


about up, and they were straightening up matters he had begun 
and was to finish up. 

Q. What do you mean by the business was about up ? A. The 
San Francisco matter, so far as daily inquiries were concerned, 
was closed. 

Q. It had then adjusted itself so that the Department and your¬ 
self understood with respect to the exact condition of the com¬ 
panies ? A. As well as we could. 

Q. And you had arrived approximately at the amount of the 
losses and the ability of the companies to stand them ? A. They 
were still disputed, of course, in very large amounts; but we could 
see what the situation was. 

Q. With respect to their financial standing? A. Yes, sir. 

'Q. The situation was no longer what you would call a critical 
situation ? A. Yo, sir, it was not. 

Q. That has ceased? A. There may have been more or less 
trouble, but there was no danger of a general collapse; rather, I 
thought there was not. 

By Senator Hinman: 

Q. The first talk you had with that man in Yew York — when 
did you first determine in your mind that you would accept his 
resignation or dispense with his services ? A. When I first took 
charge of the Department I had in mind a change or reorganiza¬ 
tion of the Yew York Branch office, that is, within a couple of 
weeks, or two or three weeks, when I could see the manner in 
which the business was going; and also in relation to the criticisms, 
and the positions of those two men. 

Q. During that entire period, through June, July, August, 
September, October, Yovember, and December, was it your pur¬ 
pose to dispense with his services as soon as you could see your way 
clear to do so ? A. It was all the time. 

By Mr. Hatch: 

Q. You contemplated in that connection to do what ? A. To re¬ 
lieve them from employment with the Department. I expected to 
keep a chief examiner — to substitute one in place of Mr. Vander- 
poel; and my conclusion at that time was not to have a first deputy. 
I doubted, and still doubt, whether the first deputy of the De¬ 
partment should be in Yew York. My plan was to have a chief 
examiner and assistant examiners for the principal lines of ex- 




Testimony of Me. Kelsey. 


401 


animation — that is, like fire, and marine, life, fraternal, etc.—- 
to organize it in a little different way, and I think, more effect¬ 
ively. 

By Senator Smith: 

Q. I understand that at the time of your accession to the office 
of Superintendent, or at some time thereafter, you had in mind 
to clean house in your Department ? A. I expected to make those 
changes — that Hunter would withdraw and Mr. Vanderpoel. 

Q. Why ? A. Well, there was a great deal of criticism and, as 
I say, I expected to have a chief examiner and not to have a 
deputy there; I expected to dispense with that office. I had no 
fault to find with Mr. Hunter’s administration of the office under 
me, however. He is a very energetic and effective man. 

Q. I understand you intended to change the personnel of the 
Hew York office because of the criticism that had been made? A. 
To some extent. I thought it would improve matters. 

Q. On account of anything you had discovered personally, with 

regard - A. Nothing whatever. Both of the men under my 

administration or supervision were as faithful employees as I 
could ask for. 

Q. At whose request, or for whose profit or convenience, was 
the retention of Mr. Hunter until the 1st of March effected? A. 
It was my own,— my view of the condition of the business. 

By Senator McCarnen: 

Q. Were any companies examined after your accession to office, 
up to the time of the resignation of Hunter and Vanderpoel ? 
A. Oh, yes, there are examinations of more or less importance 
going on continuously. We have fifteen or sixteen examiners now, 
whereas we only had about thirteen then, and they are busy all 
the time, practically. They are divided up. Sometimes there will 
be two together, and sometimes half a dozen, or sometimes, in big 
examinations, a dozen. 

Q. But there were no important examinations during that 
period ? A. Well, the Metropolitan was examined through the 
summer. 

Q. The Metropolitan ? A. The Metropolitan Life. 

Q. Who conducted that examination? A. Mr. Vanderpoel; 
that is the only large one. It kept the office busy during the 
summer. 

26 

, i , ; i ^.,i i . ' i i ' i t t - ■ -j . -t 





402 


/ 


Senate Judiciary Committee. 

By Senator Grady: 

Q. I understood you to testify before the Governor that from 
tbe time of your accession to the office, both Mr. Hunter and Mr. 
Vanderpoel, in all they did, acted under your direction? A. 
They did. 

Q. And that you kept yourself informed of just what they did? * 
A. Every day. 

Q. And that you satisfied yourself as to the character and as 
to the reliability of the information obtained? A. I did. 

By Mr. Hatch: 

% ' 

Q. One thing I omitted, Mr. Kelsey. This information that 
was acquired by Mr. Vanderpoel and Mr. Hunter, as you have 
described it, was not acquired in an examination of these com¬ 
panies ? A. It was not. 

Q. You did not make an examination of the fire companies at 
that time? A. I did not; not all of them; there were one or two 
exceptions. 

Q. How, why didn’t you examine the fire companies at that 
time ? A. It was an utter impossibility to get through with all 
those about which complaints reached me or criticisms or requests 
for action, with the force we had at that time. 

Q. It would have taken how long to examine them ? A. It de¬ 
pends on the thoroughness of the examination. A large company 
would take several weeks. In the aggregate, it would take, with 
the force we had, two or three years. And the very fact of start¬ 
ing in a force of examiners might have started the crumbling of 
the situation. 

Q. That is, it might have precipitated the insolvency of these 
companies? A. That is what I felt. Their books at that time 
had nothing in the way of liabilities from San Francisco, and an 
examination of their books would have shown solvency. We 

could not charge up the claims, unsubstantiated, that had been 
made against them. 

Q. I suppose that a report by the Insurance Superintendent of 
the impairment of a company would have been disastrous in its 
results? A. Destructive to the company, and would have made 
infiuite trouble. 


Testimony of llit. K ELSEY. 


. 403 


By Senator Smith: 

Q. As a matter of fact, after such supervision as you exercised 
over these companies, how many were impaired? A. Well, there 
are a number that were impaired which, before a condition was 
reached where their insolvency was established, made good by 
their own capital. 

Q. I mean, the present situation ? A. There is the Dutchess — 
and the North German went into the hands of a receiver, and 
I think there is one other. The starting, I was about to say 
a moment -ago, of an examination or the finding of an im¬ 
pairment would have precipitated the cancellation of policies in 
big volumes and created sort of a panic among the policy-holders 
as I believe. 

By Mr. Hatch: 

Q. So that, if I understand you, instead of resorting to the 
examinations you resorted to these other methods to acquire this 
information so that you could properly supervise those companies ? 
A. Yes, and meanwhile, encourage the men that I knew to be 
honorable and straight in their efforts to straighten out their 
finances and to be ready to meet their losses. 

-By Senator Page: 

Q. It would not be impossible to get a man to fill the position 
of chief examiner in your Department, would it ? A. I do not 
think it would, in the course of time. 

Q. Then, so far as the position of chief examiner is concerned, 
there are men in the United States who could fill the position, 
aren’t there? A. I have no doubt of it. I do not believe there 
is a position on earth but what another man can be found as 
good as the man in it. 

Q. The great value of Mr. Yanderpoel’s services was because 
you could not get a man possessing the same qualifications arising 
from his intimate relations with the officers of the companies? 
A. It was his peculiar qualifications that came from long service 
and familiarity with the insurance world generally. It was not 
from any special acquaintance with any particular men or officers. 

Q. You spoke of his intimate confidential relations with the 
officers of these various companies — that he could get informa¬ 
tion that it would be impossible for any other official of the De¬ 
partment to get? A. Yes, through his acquaintance; I don’t 


404 


Senate Judiciary Committee. 


know that lie had any confidential relations with them. It is like 
any other business; men who have been in the Department over 
twenty years can naturally more readily get at the details. 

Q. Of course, unless a man had had that service he would 
not be equally efficient ? A. That is the idea. 

By Mr. Hatch: 

Q. There are plenty of men, are there not, in the employ of 
tlie insurance companies, who possess the same qualifications as 
Mr. Vanderpoel? A. Of course there are; yes, sir. 

Q. What about the salaries which the companies pay as com¬ 
pared with the salaries which the State pays? A. They are 
vastly increased. 

Q. So that the condition which confronts you in acquiring a 
skilled man to fill his place is based on the salary which the 
State authorizes you to pay? A. To some extent. Mr. Vander- 
poel went from our Department to a seventy-five hundred dollar 
position. He w T as getting five thousand with us. 

Q. What position does he occupy now? A. He is vice-president 
of the Eagle Fire Insurance Company. 

Q. Do you know whether the history of the Insurance Depart¬ 
ment is that men educated in the Department usually graduate 
into the service of one of the companies at an increased salary? 
A. I know they have; I do not know of very many instances. 

Q. So that a man equipped for such a position is usually found 
in the employment of the insurance companies ? A. Yes, sir. It 
is more noticeable in the case of the actuaries. Our chief actuary 
gets forty-five hundred. They get, some of them, eight and ten 
thousand, and from that down, in the companies. 

Q. So that one of the conditions which confronted you with 
respect to acquiring skilled labor was that you were limited in 
salary as fixed by the statute ? A. Insufficiency of salaries, yes. 

By Senator Page: 

Q. Do you know how the Eagle Eire Insurance Company 
settled its San Francisco losses? A. I do not. 

By Mr. Hatch: 

Q. Have we got that record here? A. Their financial statement 
is filed. We have their statement in the circular of what had 
been paid, etc. The matter could be looked up. 

Q. Will you look it up and produce the whole record ? A. Yes. 


V 


Testimony of Mr. Kelsey. x 405 

By Senator Page: 

Q. There is an insurance publication published by a man 
named Best, is there not ? A. There is. 

Q. Which gives the details as to these companies ? A. I do 
not know that. I think that company has issued a special circular 
or a little pamphlet on the San Francisco situation or losses. 

By Mr. Mayer: 

Q. That is the Eagle? A. Ko, Best & Company. 

By Mr. Hatch: - , 

Q. When did Mr. Vanderpoel cease his connection with the 
department ? A. The first of February. 

Q. And under what circumstances? Did you have any con¬ 
versation with him ? A. I had. 

Q. When? A. Well, I could not remember the dates other 
than as I have stated. I saw Mr. Vanderpoel early in the sum¬ 
mer. I saw him later in the season and then in January. 

Q. When you first saw him, wliat conversation did you have 
with him ? A. I don’t remember the exact words. 

Q. Well, give the substance, then. A. That he was ready to 
quit if I desired him to. 

Q. Was that all you recall of the first conversation? A. That 
first time, yes. 

Q. Do you recollect what your reply to that was ? A. I told 
him that for the present I wanted to have him continue, that 
I could not replace him. 

Q. Then was there anything further than that said at that 
time? A. No, I do not remember any more then. 

Q. When did you have your next conversation with him ? A. I 
don’t think I could fix the date. The next one I remember dis¬ 
tinctly was early in January. 

Q. And then what was the conversation ? A. There was talk 
of the work being closed up. 

Q. What work ? A. That he had been taking care of. There 
was the examination and the special work in regard to the fire. 

Q. Did you refer to the examination of the Metropolitan? 
A. I do not recall distinctly, but I think I did. He had been 
finishing that up. 


406 Senate Judiciary Committee. 

Q. And the other work, what was that? A. The fire situation 
— San Francisco. 

Q. Now, state the conversation as nearly as you can recall it. 
A. I could not give it in detail. I remember at that time he 
alluded to the criticisms in the Armstrong report and the feeling 
that had been shown against hinq and stated that he was entirely 
willing to withdraw; that it would perhaps be just as well if he 
were not connected with the Department. 

Q. What reply did you make to that? A. I don’t know that 
there was very much said, any more than acknowledging his 
appreciation of the situation and stating that I would take his 
resignation at any time he chose to forward it. 

Q. And with respect to the condition of the San Francisco fire, 
the situation then was the same as you have described existing 
at the time you had the conversation with Mr. Hunter? A. Yes. 

Q. When did he send his resignation? A. I do not remember 
the date, it took effect the first of February, is my recollection. 

Q. Was the conversation in January prior to the Governor’s 
request for you resignation ? A. It was. 

Q. And you had then arranged to accept his resignation ? A. 
Oh, I had his resignation before that. 

Q. Was his resignation in writing? A. It was. 

By Senator McCamen: 

Q. What date was that? A. I don’t remember, I can send 
for it. 

By Mr. Hatch: 

Q. He had actually resigned prior to the Governor’s request 
of you? A. Yes. 

Q. At that time he did not have any connection with the 
department? A. No. 

Senator Armstrong.— Will you have that resignation sent for? 

Mr. Hatch.— Yes. 

Q. I show you a bundle of letters (handing papers to witness) 
what is that? A. The first is a letter from Governor Frank 
Higgins under date of July 30th. He encloses a copy of a letter 
which he states to be a subject of first importance. That is a 
letter without a signature — the other- 

Q. Did it ever have a signature, as far as you know? A. I 



s 


40t 


/ 


Testimony oe Mr. Kelsey. 

do not recall now. There is no signature there. The letter came 
to me without the signature. 

Mr. Hatch.—I desire to have that marked in evidence. (Ad¬ 
mitted and marked Exhibit Ho. 118.) 

Q. You learned, Mr. Kelsey, subsequently, that this letter 
without a signature, was sent by an individual? A. I did. 

Q. And that the Governor had transmitted that letter to you? 
A. Yes, sir. 

Q. But withheld the signature. A. He did. 

Q. How, 1 show you another lot of correspondence (handing 
papers to witness) what is that? A. It is a note from Governor 
Higgins enclosing a letter for my information, as he states. 

Q. Is that the letter that was enclosed to you attached? A. 
The original letter, yes. 

Q. And that is signed by whom? A. Mr. C. A. Moore, and 
a copy of my reply. 

Q. Was there a reply in the other package? A. There was. 

Q. State whether or not the replies to those letters were written 
by you personally ? A. They were. 

Mr. Hatch.—I desire to offer those in evidence. (Admitted 
and marked Exhibit Ho. 119.), 

Q. Your reply was transmitted to whom? A. To the 
Governor. 

Mr. Hatch.—I will interpose here to offer in evidence those 
resignations. 

Q. Will you look at that (handing paper to witness) what is 
that? A. The resignation of Mr. Isaac Vanderpoel, dated 

January 7th. 

Mr. Hatch.—I 4©sire to offer that in evidence. (Admitted and 
marked Exhibit Ho. 120.) 

Q. I show you another (handing paper to witness) what is 
that? A. This is the resignation of Mr. Robert II. Hunter, as 
Deputy, dated February 19tli. 

Mr. Hatch.—I offer that in evidence. (Admitted and marked 
Exhibit Ho. 121.) 

Mr. Mayer.— On the letter, in Exhibit 120, there is in stamp, 
blue stamp, the words and figures “Jan. 18, 1907.” There is 
also the following: “Card Index,” “Ins. Dept. Jan. 17, 1907, 
State of Hew York.” .. , 






408 


Senate Judiciary Committee. 


By Mr. Mayer: 

Q. 1 am requested to ask you wliat those figures and letters 
indicate? A. That is the card index stamp of the Department. 

Q. What does that mean ? A. That is the record we keep of 
the mail received. The resignation was in my desk for several 
days before it was put on the card index. 1 o have put it on 
record in the Department would have been to have giver, imme¬ 
diate notice of it, and Mr. Vanderpoel asked me to hold it for a 
few days, and I did so. He wanted to give it out in Hew York 
himself. 

** • 

By Senator Armstrong: 

Q. There are three stamped marks upon the letter, one in the 
upper left hand corner, Insurance Department, January 17, 1907, 
a blue stamp. A. I have never seen it since, so X don’t knew 
exactly what they are. 

Q. Separate from that is another stamp, “ Card Index ”, and 
separate from that is File Ho. 10,211, January 18, 1907. Your 
answer bears two stamps, “ Card Index 77 and File Ho. 10,211, 
January 18, 1907, your letter bearing date January 11, 1907. 
Will you kindly explain the significance of those several stamps? 
A. I think one is the receiving stamp and the other the file. As 
I suggested, I find that the stamp upon the left is the receiving 
stamp put on all mail coming into the Department. 

Q. Reading what? A. “ Ins. Dept., Jan. 17, 1907. State of 
Hew York. 77 The other one is the file number of the card index 
system. 

Q. Reading what? A. That reads “ File Ho. 10,211,” and it 
was placed on file January 18,— or placed on the file—1907. 
The words “ Card Index 77 placed across the top indicate that it is 
a letter which should have the answer attached to it. 

Q. How, can you tell from those stamps when that letter was 
received in your office? A. Those stamps were put on after T 
delivered it to the clerk. I held it three or four days. My letter 
in reply is dated the 11th. 

By Senator Ilinman: 

Q. Have you any means of ascertaining when that letter was 
first delivered to you, when it first came into your possession. 
A. I have not, other than the date. He told me that he would 
write it, and he came up personally and delivered it to me. lie 



Testimony of Mr. Kelsey. 


409 


wished to have the resignation given ont from New York, and 
asked me to withhold it until it was announced down there, and it 
was in the drawer of my private desk, and when it was announced 
in some paper, some insurance paper in New York, then I handed 
the letter to the index clerk. 

Q. What I mean is this: Was that letter in your possession, 
had it been delivered to you prior or was it delivered to you after 
your resignation had been asked for by the Executive? A. Oh, 
it was before that; it was the 18th, according to the stam]), and 
my resignation was asked for the 31st of January. The last file 
mark is the 18th. v 

By Senator Grady: 

Q. Your answer is dated January 14, is it? A. January 14tli, 
yes. 

Q. And you say, after he came up and handed you that letter 
and requested that it should be held, you held it ? A. T did. 

Q. And your answer was written before you handed it to the 
clerk to he placed among the files of the Department ? A. Yes. 

By Senator McCarren: 

Q. That was on the 18th? A. I wrote the letter on the 14th. 

Q. But it was filed on the 18th? A. It was no doubt at the 
same time the other letter was. 

By Senator Smith: 

Q. Your letter to Mr. Vanderpoel bears date — what date ? 

A. 14 th. 

Q. And the file mark is? A. The 18th. 

Q. On VanderpoeFs letter to you is what date ? A. The 7th. 

Q. Of course, you did not write your letter accepting his resig¬ 
nation before you received it ? A. I did not, but I knew his resig¬ 
nation was coming a week or two before that, 

By Mr. Mayer: 

Q. Examining both the letter of Mr. Vanderpoel to you and 
your answer to him, do each of those letters contain or bear the 
file mark January 18th? A. They do. 

(Mr. Mayer here read Exhibits Nos. 118, 119, 120 and 121, 
which are as follows) : 


I 


Senate Judiciary Committee. 


410 

Exhibit 118: 

State of New York — Executive Chamber, 

Albany, July 30, 1906. 

Hon. Otto Kelsey, Superintendent of Insurance, Capitol, 
Albany, N. Y. 

Dear Sir.— Enclosed please find copy of letter which I have 
received this morning, on a subject which seems to me of the first 
importance. 

I should be very glad to have you give me such information as 
you may possess, and advise me of any action that your Depart¬ 
ment may have already taken to protect the interests of policy¬ 
holders in these companies. I am, 

Yours truly, 

Enel. FRANK W. HIGGINS. 


New York, July 25, 1906. 
Hon. Frank W. Higgins, Executive Chamber, Albany, N. Y. 

My Dear Governor Higgins.— I wish to call your attention to 
a condition of affairs growing out of the San Francisco fire that 
is, to my mind, very serious, and one which it is necessary to call 
to the particular attention of your Insurance Department. I have 
received a great many letters from my customers and friends in 
San Francisco who were heavy losers in the terrible disaster that 
befell that city, and I find that the situation there is really very 
serious. The manner in which the insurance companies are at¬ 
tempting to compel the policy-holders to compromise with them 
in the payment of their insurance is very serious. I have re¬ 
ceived two or three letters that are really pathetic, from very 
strong, representative men. They state that if the insurance com¬ 
panies had come forward and paid their losses fairly well, as some 
companies are doing, it would have enabled them to have cleared 
their lots and started rebuilding, but they are simply tied up, 
and the working men are leaving there, and it will be very hard 
work, in view of the active building operations all over the 
country, to get them back again, and they feel almost hopeless. 
If this situation continues for six months longer, it will be teg. 
years before San Francisco-is rebuilt. 



Testimony of Mb. Kelsey. 


411 


i 


. I am informed that it is common talk in insurance circles that 
a number of fire insurance companies, badly impaired, if not bank¬ 
rupt, are being permitted to do business in this State. This is a 
matter of greatest importance to the citizens of this city and the 
State. The property owners generally look to the Insurance De¬ 
partment of the State of Kew York to protect them by stopping 
companies from doing business that are not solvent, and I desire 
to urge upon you the necessity of having the Insurance Depart¬ 
ment give this matter the most careful attention, seeing to it that 
no insolvent fire insurance company is being permitted to do 
business in Kew York State. I could cite you many instances, 
but I do not feel warranted is using the name of companies, or 
entering into any attack on any particular company. But as a 
large insurer myself, and a merchant doing business with those 
people that have suffered so by fire, I do not believe that the 
companies that are practically “ welching ” (if you will permit 
me to use the sporting word) in their just liabilities, should be 
allowed to continue doing business under the protection of the 
Insurance Department of this great Empire State. 

I was one of the Belief Committee of the Chamber of Com¬ 
merce, and I was at daily meetings with them, so we were kept 
informed very fully of the situation over in San Francisco, and 
we learned much to make us feel ashamed of some of the com¬ 
panies in this State, and the methods they are using to settle 
their losses, and in our judgment they are unworthy of writing 
fire insurance business here. They have attempted to put up the 
rates to recoup themselves and to convey the idea to their stock¬ 
holders that their losses were less than they really were. I be¬ 
lieve, in your thorough manner of looking into everything pertain¬ 
ing to the good name of the corporations doing business in this ' 
State* under the supervision of your departments, that you will not 
allow this to continue, or if it should, it may be, in my judgment, 
and that of many other thoughtful men, a very serious proposition 
in the fall campaign we are entering into. I think men are pre¬ 
paring information now regarding this work, among our oppo¬ 
nents, to use in attacking the Insurance Department. I have 
copies of the San Francisco Examiner, Mr. Hearst’s paper, which 
shows that they are working up a big feeling on this subject there, 
and it would naturally he brought here if our Insurance Depart¬ 
ment is in any way vulnerable. 

I write you this in a personal letter because of my interest in 


412 


Senate Judiciary Committee. 


the welfare of your splendid administration, and knowing, with 
the many, many matters that have come to your attention, that 
possibly the one that comes to mine as a merchant and a creditor 
in San Francisco with some of the leading and best established 
houses there, would escape you, but confident that the matter will 
receive the consideration you have always given to matters of 
this kind, 

With very kind regards, I remain 

Sincerely yours, 


STATE OF NEW YORK — INSURANCE DEPARTMENT, 

Albany, July 31, 1906. 

Honorable Frank W. Higgins, Executive Chamber, Albany: 

My dear Governor.— Your communication of the 30th covering 
copy of a letter addressed yourself regarding the fire situation 
and the financial condition of some of the companies following 
the San Francisco conflagration, is received. 

Immediately after the San Francisco disaster, this Department 
called upon all of the fire companies operating in this State for an 
estimated statement of their California losses, such statement to 
be rendered as of May 5th. On May 12th, a circular letter was 
issued, carrying these returns. On June 20tli all of the companies 
were again called upon for a sworn return of their California 
losses as of June 30th. These returns have been carried in a sec¬ 
ond circular, issued under date of the 28th instant. Copies of 
these two circulars are herewith forwarded you. 

The Department appreciates the seriousness of the situation 
and its possible effect upon some companies and believes the ac¬ 
tion taken by it has resulted in furnishing the public with as 
accurate and complete data as it has been possible to collect at 
this time. We have commenced an examination of one of our 
State companies which' apparently has been affected by this 
disaster as seriously as any of the New York fire companies has 
been. This examination is now in progress. When it comes to 
the point where the examiners must determine the liabilities of 
the companies incident to its San Francisco losses a question will 
arise which must necessarily confront all examiners. Many of 





Testimony of Mr. Kelsey. 


413 


the companies have in their policies an earthquake provision. 
What the liability of a company may be with such a provision in 
its contracts, is a question which probably will have to be detev- 
mined by the courts. The question of salvage is one which has 
not been determined in many instances and there must necessariiy 
be a delay in this particular. The question of reinsurance will in¬ 
volve the earthquake and salvage clauses. A still further ques¬ 
tion has been raised as to the use of dynamite in destroying prop¬ 
erty for the purpose of stopping the conflagration; some of the 
companies claiming that the use of dynamite involved the munici¬ 
pality in the loss. 

In my judgment no Department would be warranted, in the 
face of such a situation, in taking harsh measures against the 
corporations and attempting to fix liabilities which at this time are 
undeterminable by insurance experts and adjusters. It is, of 
course, necessary that the Department should keep in as close 
touch as possible with all companies, with their methods of ad¬ 
justing losses and with the situation as it may change from time 
to time with the additional information which will necessarilv 
come to the companies. Some of the most conservatively man¬ 
aged corporations — those which would not for one moment think 
of “ welching ” (using the expression contained in your corre¬ 
spondent’s letter), have increased the amount of their liability 
between the dates of the first and second Department letters. This 
increase has been incident to more complete data in their posses¬ 
sion. It is possible, in fact it is probable, that some of the com¬ 
panies filing their sworn returns as of June 30th will be com¬ 
pelled, with the further information which they will receive within 
the next ten weeks, to increase their loss figures. 

It is the intention of this Department to examine the various 
companies of this State as speedily as it is possible to do so, 
and where the companies of other States appear to be seriously in¬ 
volved, we shall request the home State departments to make the 
necessary examinations. 1STo amount of departmental supervision 
or activity can, in my judgment, relieve the situation as it exists 
ai; present. 

The question of the companies putting up rates to recoup them¬ 
selves, is certainly not within the control of the Department. 
'The law does not contemplate that the Insurance Department shall 
fix the rates of fire companies. If the boards of directors of the 
various companies and the boards of underwriters representing 


/ 



414 


Senate Judiciary Committee. 


tlio various companies, determine that an increase in rates is 
necessary, they must be the judges. Certainly without a suffi¬ 
ciency in rates it will be impossible for companies to create a sur¬ 
plus, <nid surplus accumulations and large ones at that, are more 
than necessary to safely carry on the business, as has been clearly 
demonstrated by the recent conflagration. 

I can assure you that the aim of the Department will be to do 
everything possible to protect the policy-holders in these com¬ 
panies and to protect the unfortunate loss claimants in San 
Francisco, exercised, however, in a conservative and painstaking 
manner. 

Respectfully yours, 

OTTO KELSEY, 

Superintendent. 


Exhibit 119: 

STATE OF NEW YORK — EXECUTIVE CHAMBER. 

Albany, August 7, 1906. 

ITon. Otto Kelsey, Superintendent of Insurance, Capitol, 
Albany, N. Y. 

My dear Kelsey.— Enclosed please find a letter for your 
information. 

Yours sincerely, 

FRANK W. HIGGINS. 

Enel. 

MANNING, MAXWELL & MOORE, 
Incorporated, 

85-87-89 Liberty street, 

New York, August 4, 1906. 

Hon. Frank W. Higgins, Executive Chamber, Albany, N. Y. 

My dear Governor Higgins.— I thank you for the opporunity 
of reading the letters you have received from the Insurance De¬ 
partment, and also the circular letters from Hon. Francis Hen¬ 
dricks and Mr. Kelsey, for which accept my thanks. I return the 
letter from the Insurance Commissioner. 





Testimony ofr Me. Kelsey^ 


415 


After reading tliis letter of the ‘Insurance Superintendent, I 
would say if he is going to accept as final the estimates made by 
various companies on tables issued by him under date of July 
28th, nothing can be done, and it would seem that we have State 
supervision that does not supervise. I think that it would be 
very easy for him to find out from high grade companies, what 
percentage of salvage is being received, without a question of 
doubt. I have understood from very large interests that it will ' 
not run over 12% per cent, or 15 per cent., and that would give 
him the actual liabilities of the companies, and find out whether 
they were solvent or not. I know of two companies he has never 
asked for information that he ought to have asked. If informa¬ 
tion of this kind had been called for under oath by New York 
State, the public would have known just how the companies stood 
by this time. 

I am pleased to know that the Superintendent of Insurance 
is personally advised as to the situation and that he will con¬ 
servatively do all that can be done to safeguard the interests of 
the public. 

The wisdom of President Roosevelt’s desire to have insurance 
under national supervision is shown by the present situation. As 
a matter of official courtesy, each Superintendent of Insurance is 
permitted to look after the companies of his own State, and the 
result is that leniency is shown that is not favorable to the insuring 
public, certain companies being permitted to continue in business 
that under the law of this State should be stopped. If no import¬ 
ant fire occurs in the near future, the situation may right itself, 
but if one should occur, there would be trouble and State officials 
would be blamed. 

In New York State a home company may not invest its funds 
in the stock of another insurance company in the same line of 
business, but we have permitted other state and foreign companies 
to own the stock of other companies and still do business in New 
York, simply striking out of their assets the amount so invested. 
This procedure is probably contrary to the law; it certainly is 
not fair to our home companies, and has been declared unwise by 
our Legislature through the passage of laws prohibiting our own 
companies from such investments. 

I inclose a clipping from the Journal of Commerce of August 
2d, and call your attention to. a statement made by the President 
of the Home Fire and Marine Insurance Company, the stock of 


416 


Senate Judiciary Committed. 


which, was all owned by the Fireman’s Fund, which company, to¬ 
gether with the Home Fire and Marine, conducted the Pacific 
Underwriters — three concerns on one capital, each seeking lia¬ 
bility and now all forced out of business, with great loss to the 
public, by reason of the fact that one capital, with three sources 
of supply, secured too much liability in San Francisco. 

This same or some modified plan is being followed by a num¬ 
ber of companies, foreign and other state, doing business in Hew 
York State, and an examination of the tables promulgated by 
Superintendent Ivelsey will convince you that dual and triple 
plants with one capital are dangerous and should be discontinued, 
no company being allowed to own the §tock of any other company, 
or issue its policy through any “ underwriters ” or other scheme, 
taking, perhaps, in this way two or three times its proper line on 
a single risk. 

Some day a conflagration may occur on Manhattan Island, or 
in some other Hew York State city, and when it does, we do not 
want to find that we have been relying on insurance that does not 
insure. 

You will note that the. Fireman’s Fund Insurance Company 
has been by its losses forced out of business. Hew York State 
policy-holders have claims against this company (which was per¬ 
mitted to do business in this State after its condition was pretty 
well known) for return premiums and very likely for losses; 
yet its funds have been used to pay, first, an assessment of 
$600,000 levied on it as a holder of the stock of the Home Fire 
and Marine Insurance Company; second, the losses of the Pacific 
Underwriters’ Association, a concern without capital; and third, 
to reinsure its liability in a company formed or forming, and the 
right of which to hold the money paid by the Fireman’s Fund 
after (presumably) being bankrupt is, to say the least, very 
doubtful. 

My interest in this matter comes, first, as a property owner 
and large insurer, and, second, as a good Republican wishing 
nothing to interfere with our success this fall. 

Yours very truly, 

C. A. MOORE. 



Testimony of Mb. Kelsey. 



Enclosure with preceding Exhibit 119: 

“ PRESIDENT DUTTON TO HOME E. & M. CLAIMANTS. 

“ Communication regarding company’s condition shows it to be 
in decidedly unfortunate condition. Says cash items and agents’ 
balances likely to disappear, off-setting drafts. 

“ Eollowing is the letter from President Dutton of the Home 
Eire & Marine Insurance Company of San Francisco to the or¬ 
ganized policy-holders regarding the situation: 

“Answering your inquiries regarding the present situation of 
the Home Eire & Marine Insurance Company, I think it would 
be best perhaps to give a short summary of the situation from the 
beginning, which will enable you to understand thoroughly the 
present situation as it has developed. 

“ To begin with, the Fireman’s Fund Insurance Company is the 
owner of the capital stock of the Home Eire & Marine Insurance 
Company, having purchased same in 1892, when all other Cali¬ 
fornia companies had been forced out of business by competition, 
and by running the two companies with but one set of fixed ex¬ 
penses it was thought that both companies could be made profitable 
by running them at a low expense account. This was a success 
and both companies had gotten strong and flourishing when the 
terrible calamity occurred on April 18th. 

“ In this conflagration a heavy safe falling from the fourth 
floor struck the corner of the vault of the Fireman’s Fund Insur¬ 
ance Company’s city department and smashed it open, and all its 
records were lost. This necessitated the Fireman’s Fund going 
out of business and turning its assets into money to meet such 
claims as should be made against it. It was then expected, how¬ 
ever, that its assets would far more than meet all these claims, 
and consequently it was thought advisable to continue the Home 
Eire & Marine in business. 

“ The insurance commissioners from all over the United States 
immediately started telegrams urgently demanding from the com¬ 
panies their estimates of outstanding losses, which, of course, had 
to be estimated only, and based on general anticipations rather 
than actual figures. The Home, however, felt satisfied that its 
losses would be about $1,500,000, and so reported. 

“ In all previous cases of conflagration the various incidents of 
over-insurance, removal of goods, partial damage, etc., have re¬ 
sulted in an average legitimate salvage to companies involved of 
27 


418 


Senate Judiciary Committee. 


about 25 per cent. This brought down tbe estimate of cash settle¬ 
ment which the Home’s policies in the conflagration would necessi¬ 
tate to about $1,125,000. 

“ The Home had $300,000 cash capital and had accumulated 
a net surplus of $515,000, and the Fireman’s Fund, its stock¬ 
holder, accordingly, to make it perfectly safe furnished it with 
$600,000; $300,000 to enable it to pay all its losses and $300,000 
more to repair its capital, and the Home for the time went on 
confidently doing its business, thinking it was perfectly safe. As 
the losses developed, however, it became evident that there was 
not going to be any salvage to amount to anything and that the 
$375,000 salvage which they had looked for would not develop. 

“ Besides its own net lines, the Home Fire & Marine Insur¬ 
ance Company was covering under many policies, parts of which 
they had reinsured with other companies, and these other com¬ 
panies also losing their similar expectations of salvage, it seems 
to us that there will be further loss to the Home through its in¬ 
ability to collect 100 cents 'on the dollar of these reinsuring 
policies, the original estimate of $1,500,000 having been of course 
the net loss to the company after collecting 100 cents on the dollar 
from its reinsurance. Of this reinsurance the company has about 
$800,000 and if it should be able to collect only 50 or 75 cents 
on the dollar from its reinsurers it would add several hundred 
thousand dollars more to the deficit of the Home Fire & Marine. 

“Added to this, the Home Fire & Marine was interested in the 
amount of one-third in the writings of the Pacific Underwriters, 
the Fireman’s Fund Insurance Company being responsible for the 
other two-thirds, and, this agency being dissolved by the retire¬ 
ment of these companies, one-third of their losses will be added 
to the Home Fire & Marine’s liabilities; and this we estimate at 
ranging from $300,000 to $400,000 for the Home’s one-third. 

“We therefore would summarize the losses about as follows: 


“ Formal loss of Home Fire and Marine Insurance 

Company, say. $1,500,000 

“ Add for Pac. Underwriters’ losses, say. 350,000 

“ Possible failure to collect from reinsurers, say. ... . 200,000 


“ Total... $2,050,000 


“As against this the Home Fire & Marine has net assets over 
other liabilities: 






« Testimony of Mr. Kelsey. 419 

u Capital. $300,000 

“ Net surplus. 515,000 

“ Received from Fireman’s Insurance Company. . . . 600,000 

“ Total .. $1,415,000 


“And to which may be added a further amount from its multi¬ 
tude of policies over the United States, the unexpired premium 
on which is now charged against the company to an amount of 
about $800,000, but many of which may never he presented for 
cancellation. 

“ How much this will add to the assets of the company it is 
impossible to tell, but if you should call it $100,000 it would 
make our assets show up, say $1,500,000, against a possible lia¬ 
bility of $200,000 ; and this is about the way we hope to pay out 
to Home Fire & Marine policy-holder's through the liquidation 
of its assets. 

“ The proposition is now how best can we get every dollar that 
can he secured from the assets of the Home Fire & Marine Insur¬ 
ance Company to help pay its losses, and the officers of the com¬ 
pany wish to assure you of their urgent desire to co-operate with 
you in any way which will produce the best results, and would 
be very thankful for your counsel and assistance in securing such 
result. 

“1 furnish you herewith a statement of gross assets and lia¬ 
bilities of the Home Fire & Marine Insurance Company, July 1, 
and would state in explanation that this deals with gross figures, 
while my foregoing statement deals with net. 

“ For instance, the agents’ balances represent unpaid premiums 
all over the United States, which undoubtedly now will never be 
paid, but against them there will he a reduction from the items 
reinsurance reserve and commissions due agents undgr the head 
of liabilities, as the insurance reserve represents the unexpired 
premiums, and of course the agents cannot collect commissions 
if they do not send in premiums. 

“ The cash in office and banks represents both cash here and in 
Boston and Chicago, and the portion there will probably, like the 
agents’ balances, disappear, as it will no doubt be used to offset 
drafts which will have come in on them in the earlier days, 
covering canceled policies that were piling upon them for a 






420 Senate Judiciary Committee. 

while at a very active rate; but, again, this will be offset by a 
reduction in the reinsurance reserves, as those canceled policies 
will no longer represent unexpired liability.” 

August 9, 1906. 

Honorable Frank W. Higgins, Executive Chamber, Albany. 

My Dear Governor.— Your communication of the 7th instant 
covering a letter dated Hew York city, August 4th, apparently 
written in reply to Department letter of July 31st addressed your¬ 
self regarding the first insurance situation and the financial con¬ 
dition of some of the companies following the San Francisco 
conflagration, is received/ 

Reviewing this August 4th letter in detail and the suggestions 
therein contained, we would state that there is nothing in Depart¬ 
ment letter of July 31st to indicate that it is our intention to 
accept as final the estimates made by various companies as carried 
in Department circular of July 28th. This circular letter was 
based ujion the sworn returns of the officers of the companies, 
presumably furnishing the best information in their possession as 
of June 30th. 

In our previous letter to you reference was made to the fact 
that some of the most conservatively managed corporations in¬ 
creased the amount of their liability between the dates of the 
Department circular of May 12th and that of the 28tli ultimo. 
In our previous letter we stated that such increase was incident 
to more complete data in the possession of the companies and 
continued: 

“ It is possible, in fact it is probable, that some of the com¬ 
panies filing their sworn returns as of June 30th will be compelled 
with the further information which' they will receive within the 
next ten weeks, to increase their loss figures.” 

It is more than probable that the Department will at some 
future date call upon the companies for another statement of 
their San Francisco losses. The value of such a statement, how¬ 
ever, will depend upon additional data which can only come 
into the possession of the companies after they have had suf¬ 
ficient time to determine the correctness of their estimates of 
salvage and reinsurance. The Department does not believe that 
under existing conditions it would be warranted in fixing the 
percentage of salvage which may be recovered by any particular 
company from the isolated experience of some other cojnpany. 

The statement under oath called for by this Department fur- 


Testimony of Me, Kelsey. 


421 


nished the public with the most reliable information obtainable 
by the Department at the date of the last circular. We have not 
attempted to fix the losses of all companies by applying to each 
of those operating in this State the experience of a certain few. 
The suggestion has been made that some of the companies have 
unnecessarily hastened the adjustment of losses; have not care¬ 
fully safe guarded their interests thereby, and have paid a certain 
percentage of claims which were fraudulent in their character. 
The companies adopting this questionable if not reprehensible 
policy should not expect to have their action taken as a basis for 
that of companies more conscientiously managed.. There would 
be gross injustice to vast business interests and an indisputable 
violation of law by the head of this Department, if, without 
awaiting accepted proofs or a decision of the courts, the totals 
of claims filed for losses in San Francisco were acknowledged 
as established liabilities and companies thereby placed under 
suspicion of insolvency were condemned offhand and prohibited 
from continuing in business in Kew York. A specific instance is 
the case of one of our smaller companies which has outstanding 
policies involving over $1,000,000 of insurance,— its officers 
inform us that loss claims for $200,000 in addition have been 
presented for adjustment in respect to which there is not a single 
record in the possession of the corporation, either at its home 
office or at its agency in San Francisco, indicating that the prop¬ 
erty in question was ever insured by the company. The Depart¬ 
ment is not prepared to hold at the present time that this is a 
liability against the corporation sufficient to close its doors. 

Many believe the present situation in fire insurance to be pre¬ 
carious but it will not be improved by officious intermeddling. 
The supposed critical condition of many companies is due to an 
unparalleled calamity and not to the incompetency or misconduct 
of their officers. In such an emergency it does not seem unreason¬ 
able for a supervising authority to conserve rather than to destroy 
confidence. Precipitate and sensational action might prove dis¬ 
astrous to the insured as well as to insurers, while a rational and 
prudent course, closely watching every development of affairs, 
supplying information to the public as rapidly as received, and 
during a period obviously necessary for reaching in the courts 
or by other process a determination of the legal liabilities to be 
imposed upon companies, to follow a consistent and orderly 
method of examination and supervision as provided by law, com¬ 
mends itself to the Department as a wise and safe policy. FTo 



422 


Senate Judiciary Committee. 


bankrupt concern will be protected, but insurance companies of 
good repute wliich Have been and are in the control of experienced 
men of high character will have the ordinary opportunity to estab¬ 
lish their liabilities before a legal tribunal, and will not be unfairly 
discriminated against pending such decision. 

To the suggestion of the writer that he knows of two companies 
which are in possession of facts as to salvages which should be 
called for by this Department and that we have been remiss in 
* this particular, we can only state that if any companies have 
such data we will be pleased to receive it or will promptly ask 
for such information if given the addresses of those possessing it. 

To the suggestion that New York State companies may not 
invest their funds in the stock of another insurance company in 
the same line of business, but this Department has permitted 
other State and foreign companies licensed to transact business 
in New York, to own the stock of other companies in the same 
line of business, we would advise that such has been the Depart¬ 
ment policy for a number of years, amply justified by the fact 
that the companies so licensed have always possessed their full 
authorized capital and a large surplus after excluding from their 
assets the investments objected to. (See annual statements car¬ 
ried in the Department reports.) Conditions are such, and have 
been such for a number of years, that the large insurers in this 
State have been unable to secure sufficient fire protection from 
authorized companies. This fact is evidenced by the large volume 
of business secured by the special agents licensed under section 
137 of the Insurance Law. The Department has never held that 
an act of this State limiting investments of the character herein 
referred to must necessarily be applied to corporations of other 
States when such corporations’ financial showings, eliminating 
the questionable assets as above indicated, were absolutely satis¬ 
factory. This is a question of Department policy and the re¬ 
sponsibility for such a ruling must be assumed by the Superin¬ 
tendent, and, notwithstanding the views of your correspondent, 
we are of the -opinion that the ruling in this particular is for the 
best interests of the insuring public. 

For a number of years companies having reinsurance agree¬ 
ments or treaties have made use of the underwriters’ plan de¬ 
scribed in your correspondent’s letter for writing joint policies. 
There has never arisen an occasion where the issuance of such 
policies has been detrimental to the interests of the insuring pub¬ 
lic. The transaction of business in this manner has been, to. a 


Testimony of Mb. Kelsey. 


423 


certain extent, for the convenience of the companies and has 
always been considered hy the Department as better protecting 
the insured who receives a joint policy of two or more authorized 
companies and has an added protection to that which would he 
secured by a policy of but one company. It has never appeared 
that this plan has been made use of for the purpose of assuming 
excess lines of hazard. It is possible that when all data relating 
to the San Francisco conflagration is compiled it will he shown 
that this plan of joint underwriters’ policies is undesirable. If 
such is the result, it will then he ample time for the Department 
to act. We question whether your correspondent is in possession 
of sufficient data at this time to warrant an unqualified disap¬ 
proval of this practice. 

The fact exists that in California a disaster unprecedented in 
our history has occurred; that as a result all fire companies have 
a new experience which will necessitate additional precautions 
in future business. Departmental supervision, company manage¬ 
ment and suggested action cannot by any possibility offset the 
results of such a disaster. In our judgment, conservatism on the 
part of the Department at this time — consideration for the in¬ 
terests of the companies and watchfulness on behalf of the policy¬ 
holders and the loss claimants — is decidedly preferable to an 
ostentatious display of over-zealous and unwarranted interference. 

It will be the duty of the Department to keep in such close 
touch with the companies as to determine that they are solvent. 
It will not be the duty of the Department to force the insolvency 
of any company, basing departmental examinations to show this 
condition upon estimated figures or upon the experience of others. 

Very respectfully yours, 

OTTO KELSEY, 

Superintendent. 


STATE OE NEW YORK — EXECUTIVE CHAMBER/ 

Albany, August 20, 1906. 

Hon. Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

My Dear Superintendent.— Inclosed please find letter from our 
friend Moore, who continues to be in a critical frame of mind. 
I send it for your information, but do not believe a reply is 
necessary. I am, Yours sincerely, 

Enclosure. FRANK W. HIGGINS. 





424 


Senate Judiciary Committee. 


Exhibit 120: 

INSURANCE DEPARTMENT — STATE OF NEW YORK. 

% 

New York Office, 11 Broadway, January 7, 1907. 

Hon. Otto Kelseiy, Superintendent of Insurance. 

My Dear Mr. Kelsey.— I beg to tender my resignation as Chief 
Examiner of the Insurance Department; to take effect February 
first proximo. 

Yours very truly, 

ISAAC VANDERPOEL. 


INSURANCE DEPARTMENT. 

Albany, N. Y., January 14, 1907. 

Hon. Isaac Yanderpoel, Chief Examiner Insurance Department, 
No. 11 Broadway , New York City. 

My Dear Mr. Yanderpoel.— Your letter of the 7th instant, 
tendering your resignation as Chief Examiner of this Depart¬ 
ment, to take effect February first next, is received. Your resig¬ 
nation is accepted as requested. 

I beg to express my personal appreciation of your courtesy and 
assistance in our official relations during the past few months of 
exceptional responsibility, and on behalf of the entire force of 
employes to extend to you, after your thirty-three years of ser¬ 
vice in this Department, our best wishes for your success in the 
field of duty which I am advised you have determined to enter. 

Yery sincerely yours, 

OTTO KELSEY, 

Superintendent. 



Resignation of Mr. Hunter. 



Exhibit 121: 

STATE OE NEW YORK — INSURANCE DEPARTMENT. 


Hew York, February 19, 1907. 
lion. Otto Keesey , ^superintendent of Insurance, Albany, N. Y. 

Hear Sir. Permit me to call your attention to our conversa¬ 
tion, held in the Insurance Department at Albany, on the 8th day 
of October last, at which time I tendered you my resignation as 
Deputy Superintendent of Insurance, to take effect at your con¬ 
venience, stating, however, that I did not desire to remain in the 
Department after the close of the year. 

The special matters pending at that time, having been disposed 
of, I have, therefore, to request an acceptance of my resignation 
forthwith. 

Respectfully yours, 

R. II. HUNTER. 


STATE OF NEW YORK — INSURANCE DEPARTMENT. 

February 20, 1907. 

Honorable Robert H. Hunter, Deputy Superintendent of In¬ 
surance, 11 Broadway, New York City. 

Dear Sir.— I am in receipt of your favor of the 19th instant 
calling my attention to your having tendered your resignation as 
Deputy Superintendent of Insurance the 8th day of October last, 
at which date you stated you did not desire to remain in the De¬ 
partment after the close of the year, and now suggesting that the 
special matters pending at that time having been disposed of, you 
request an acceptance of the resignation forthwith. 

In accordance with your request, I hereby accept the tendered 
resignation to take effect as soon as the arrangements can be made 
by the Department to place a competent man in charge of the New 
York office. 

Very respectfully yours, 

OTTO KELSEY, 

Superin tende n t. 





426 


Senate Judiciary Committee. 


By Senator McCarren: 

Q. Mr. Kelsey, do you believe that it would have been possible 
for you to have acted at that particular juncture in the fire in¬ 
surance affairs of the country, in a way to have forced the 
insolvency of any company ? A. I don’t know that I quite get 
your question. 

Q. Well, I mean — what I mean to convey to your mind is 
this: Do you think the Insurance Department could have, by the 
pursuit of any particular course, forced the insolvency of any of 
these fire insurance companies ? A. By proceedings ? 

Q. By any action on the part of the Department or yourself, 
personally, as Superintendent ? A. I think it could have broken 
down public confidence. I doubt whether proceedings, based on 
any examination we could have made, would have been sustained 
in the courts as showing the insolvency of the company against 
which were pending simply the claims in dispute. 

Q. Could the insolvency of any one of these companies have 
been forced in any way by any action on your part ? A. It could. 

Q. Will you please explain that ? A. It seems to me that if 
the Department had proceeded harshly against any company and 
determined that it was insolvent by reason of the reports that were 
estimates of the amounts of losses, that it would have led the 
policy-holders in that company to cancel their obligations. It 
would have affected the credits, so far as they were based upon 
insurance policies of that company, and I think it would have 
precipitated serious trouble and ultimate insolvency. I don’t 
think you could have avoided it. And if it had had that effect 
with one company it would have spread. 

Q. That was what you were trying to avoid ? A. I was trying 
to avoid widespread devastation in financial circles. This letter — 
this correspondence with Mr. Moore is simply indicative of what 
was doming in every day. We were occupying ourselves trying to 
do what we could to get accurate information, and many of the 
companies involved meanwhile were increasing their capital and 
surplus and getting on their feet. 

By Senator Page: 

Q. Have you made any examination of fire insurance com¬ 
panies ? A. Yes. 

Q. Since December? A. Since December. 


Testimony of Mr. Kelsey. 


427 


Q. I understand you that up to December you bad not ? 
A. We bad made examinations into the Dutchess and North Ger¬ 
man. There were other examinations on the question of increase 
of capital and surplus. 

Q. I mean with reference to their losses or how they were pay¬ 
ing them ? A. That is all I recall at this moment. 

Q. A large proportion of the losses incurred by the companies 
by reason of the San Francisco fire had not been settled at the 
time this circular of December 31st was gotten out ? A. Why, I 
think a great many of them are not settled yet. 

By Senator Smith: 

Q. As I understand you to say, during all the time after your 
accession to the office of Superintendent of Insurance, you were 
yourself, and through your subordinates, prosecuting inquiries 
as to the doings and the conditions of these insurance companies ? 
A. I was. 

Q. Including the manner in which they were approaching the 
adjustment or payment of their losses? A. That is true. It was 
a period of constant watchfulness. 

Q. But that you did not have an ordinary examination for the 
purpose of determining the financial condition of any of the in¬ 
surance companies except those-A. Which the necessity 

required. 

Q. (continuing) which you mentioned ? A. Yes. 

Recess taken until 2 :30 p. m. 


After Recess — 2:30 p. m., March 29, 1907. 

Otto Kelsey resumed the stand and further testified as 
follows: 

By Mr. Hatch: 

Q. Mr. Kelsey, in the letter — in the correspondence read by 
General Mayer, in the last letter which appears* is the letter from 
Governor Higgins? That refers to another letter from Mr. 
Moore, which does not appear to be in that correspondence? Do 
you recollect about the letter? A. Nothing more than the receipt 
of it. 





428 


Senate Judiciary Committee. 


Q. And have you any recollection, either as to its contents or 
what you did with it ? A. I have not. 

Q. Do you know whether it is in the files of your Department ? 
A. I do not. It is mv vague impression that it was sent back to 
Governor Higgins, but I have sent now to see if it is on the files. 

Q; Yon do not recollect what the contents of the letter were? 
A. I do not. My impression would be, from the Governor’s note, 
that it was still expressing disappointment. 

Q. And referred to the same general subject? A. Yes, and 
there was no reply to it. 

Q. At the adjournment, Senator McCarren had asked you con¬ 
cerning what steps you should have taken or if you could have 
taken other steps than you did take with respect to the insurance 
companies, as to what would be the effect of, or would have been 
the effect on those companies. How, can you state any more fully 
than you did with respect to the question of Senator McCarren? 
A. I thought I stated it was my belief it would have been dis¬ 
astrous. 

Q. Well, in what respect, and how? A. That it would have 
precipitated trouble, panic. 

Q. What did you think was the underlying thing that would 
have produced a panic, which by your action you sought to avoid ? 
A. I thought that any action that started distrust, a general dis¬ 
trust in the solvency of the companies — that it would affect the 
credits; would lead to suspension — might lead to a general 
panic in the insurance world. The information that was con¬ 
tinually thrust upon me, I might say, sometimes placed it as high 
as forty or fifty companies —■ the assertion that they were really 
insolvent and that the Department was negligent in permitting 
them to do business. 

Q. And if you had taken drastic measures against any one of 
those companies, the result most likely to have followed would 
have been to disturb the state of the public mind? A. Precipi¬ 
tated a panic. 

Q. Along the whole line? A. I believe it would. It was not 
my judgment alone, but also that of men in whom I had great 
confidence. 

Q. And with whom you consulted with respect to that situa¬ 
tion? A. Yes. > , ---r 

Q. And it was to preserve the confidence of the public in the 
insurance companies and still protect the policy-holders that 





Testimony of Me. Kelsey. 


420 


marked your line of action in dealing with that situation? A. It 
did; and to preserve the companies to take care of the insurance 
that was needed. 

Q. Did you receive a letter from the Committee on Insurance 
and Fire Regulations of the Few York Board of Trade and 
Transportation ? A. I did. 

Q. Will you produce that letter, please? A. This, is a copy of 
the letter. 


Q. Do you know where the original is? A. This seems to he 
copies of the correspondence. 

Q. How did that reach you ? A. By mail. 

Q. What is its date? A. August 10th. These are copies; 
the originals should he in the correspondence. I remember the 
letter distinctly. 

Mr. Hatch.— I desire it marked for identification, and I will 
supply the original letter. (Marked Exhibit 122, for identifi¬ 
cation.) 

Mr. Hatch.— I desire to have General Mayer read those. 

*/ 

(Mr. Mayer then read Exhibit 122 for identification, which is 
as follows) : 


Exhibit Ho. 122 — For Identification: 

March 29, 1907. 


HEW YORK BOARD OF TRADE AHD TRAHS- 

PORTATIOH. 


203 Broadway, Hew York,* August 10, 1900. 

Hon. Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— We ask your attention to reports current in fire in¬ 
surance circles that there are probably twenty companies doing 
business in this State which have been so weakened- by the San 
Francisco iosses that thev are no longer solvent institutions, their 
capital being heavily impaired, where the capital and surplus has 
not been entirely wiped out. Well-informed fire insurance 
brokers, and other experts, are in a position to discriminate and 
to thus protect themselves and their clients, but there are many of 
our citizens who, relying upon the State supervision, feel that 
any company permitted to do business in this State is considered 
solvent by your Department and must, therefore, be reliable. 





430 


Senate Judiciary Committee. 


Is early four months have elapsed since the San Francisco con¬ 
flagration, and we respectfully urge upon you the necessity for 
immediate action looking to the weeding out of fire insurance com¬ 
panies that are no longer qualified to do business‘in this State 
under the requirements of our Insurance Department as to sol¬ 
vency. 

t/ 

If a large fire, involving a loss of say ten millions of dollars, 
would occur in any of the large cities of the State, it would in our 
opinion he found that much of the insurance that is now being 
paid for would be of little, if any, value and that the companies 
which are most in need of surveillance are those that are accepting 
business most freely. 

We also respectfully ask you to consider the wisdom of barring 
from business in this State, fire insurance companies who own the 
stock of other companies in the same line of business, or who 
operate “Agencies ” or other similar schemes; the agencies of this 
kind being merely enterprises to get double liability on one capital. 
The San Francisco conflagration clearly demonstrated that it is 
not wise to permit so many sources of liability supply for one 
capital, and, in our opinion, the law of this State which prohibits 
the fire insurance companies from owning the stock of another 
fire insurance company is a wise one, and should be applied to 
every company, domestic or foreign, doing business in the State 
of Hew York. 

Ho company should be permitted to issue or to participate in 
the issue of any policy other than that which is absolutely its own. 

Very respectfully submitted, 

PHILIP S. TILDEH, Chairman. 

W. E. CLEARY, 

ALBERT PLAITT, 

EDWIH II. SAYRE, 

Committee on Insurance aucl Fire Regulations, New York Board 
of Trade and Transportation. 

August 14, 1906. 

Mr. Philip S. Tilden, Chairman, Committee on Insurance and 
Fire Regulations, New York Board, of Trade and Transpor¬ 
tation, 203 Broadway, New York City. 

Dear Sir.— Your favor dated August 10, in relation to present 
conditions in the fire insurance business, is to-day received. 

T am gratified to have suggestions from your organization and 
desire that the official action of this Department in so important 



Testimony of Mr. Kelsey. 


431 


a matter as the security of insured property against fire loss may 
have the approval and support of the Board of Trade and Trans¬ 
portation. 

Our attention has been heretofore called to current reports of 
the insolvency or serious impairment of capital and surplus of an 
unspecified number of unnamed fire insurance corporations which 
may at the present time be doing business in this State, coupled 
with requests that immediate action be taken to close out such as 
are found to be disqualified. Your letter practically repeats the 
substance of communications from other sources. The Department 
is anxious for definite information of the condition of all or any 
insurance companies engaged in business in New York and will 
act promptly thereon for the protection of those insured or re¬ 
quiring insurance, but in the present juncture distrusts the insti¬ 
tuting of public proceedings against a company on the foundation 
of rumors and suspicion. We will continuously seek for the facts 
and as proof is obtainable will move in separate cases as they sev¬ 
erally can be investigated. It does not seem to be for the public 
interest to make an official and promiscuous attack upon all cor¬ 
porations involved in the catastrophe at San Francisco, because 
their estimates show possible difficulties in meeting losses without 
impairment. It is not regarded as unfair to either policy-holders 
or corporations that disputed liabilities be legally established 
before the corporation is condemned as insolvent. A duplication 
of the losses at San Francisco would undoubtedly ruin a large 
number of insurance companies, which although now embarrassed 
will extricate themselves, having all the probabilities in their 
favor. It appears like injustice to honorable men, hopeful and 
determined to meet their obligations in a crisis for which they are 
blameless, to deny a respite before crushing them out of existence 
for fear that a second calamity may somewhere follow the recent 
conflagration. The purpose of the Department is to fairly, con¬ 
servatively and vigilantly perform its full duty as time and 
changing circumstances develop the course that should be pursued. 
It is not practicable that upon a fixed and early date the lists of 
companies under supervision, without evidence or confession, shall 
be marked off as good or bad and so advertised. The unsafe will 
be eliminated as sufficient cause is shown, and with the minimum 
of loss possible. A safe company that should be strengthened will 
be encouraged and assisted. No partial favors will be extended 
and no invidious discriminations made. 


432 


Senate Judiciary Committee. 


The matter of regulating or prohibiting in this State the busi¬ 
ness of fire insurance companies from other states owning the 
stock of other companies in the same line of business, or who 
operate through so-called agencies,-is being considered under the 
experience of results affecting such insurance in San Francisco. 
If, upon careful examination, there are good reasons demanding 
the adoption of a different rule than has prevailed in this State 
a change will be directed. 

Very respectfully, 

OTTO KELSEY, 

Superintendent. 


NEW YORK BOARD OF TRADE AND TRANSPOR¬ 
TATION. 

203 Broadway, New York, August 25, 1906. 

Hon. Otto Kelsey^, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— The Committee on Insurance and Fire Regula¬ 
tions acknowledges with thanks your letter of the 14th inst. This 
Committee is in full accord with the sentiments expressed in your 
letter that “ It does not seem to be for the public interest to make 
an official and promiscuous attack on all corporations involved in 
the catastrophe of San Francisco.” We have no desire to magnify 
this misfortune, but, in our judgment, there is nothing to be 
gained by refusing to face the obvious facts. 

The Committee is pleased to learn that your “ attention has 
been heretofore called to current reports of the insolvency or 
serious impairment of capital and surplus of an unspecified num- ' 
ber of unnamed fire insurance corporations which may at the 
present time be doing business in this State coupled with a request 
that immediate action be taken to close out such as are found to 
be disqualified,” but we must confess disappointment at the state¬ 
ment that your Department “ in the present juncture distrusts the 
instituting of public proceedings against a company on the founda¬ 
tion of rumors and suspicion.” In this connection we beg to say 
that it is not within the province of this Committee, nor of any 
group of citizens, to attempt to furnish to your department any 
of the “ definite information of the condition of all or any insur¬ 
ance companies engaged in business in New York,” for the mani- 



Testimony of Mr. Kelsey. 


433 


fest reason that we have neither the authority nor the means to 
make an investigation of such character as would justify present¬ 
ment to your Department. 

The statement referred to in our previous communication as 
rumors were taken from publications by officers of insurance com¬ 
panies in the public press, claims as to percentages of salvage and 
other conditions published in the insurance and financial press of 
our city, which in themselves should call for a prompt-examina¬ 
tion of the companies involved, together with the opinion of those 
who may be classed as insurance experts. In our judgment, there¬ 
fore, the only proper channel of investigation for the citizens of 
this State is found in the Insurance Department. And in this 
connection permit us to refer to the policy of the departments 
of our national and State governments having jurisdiction over 
our banking systems. These departments act of their own voli¬ 
tion, or upon current rumor. They do not expect the bank’s cus¬ 
tomers to furnish them with “ definite information of the condi¬ 
tions ” of the bank, but, in the interest of the public* they act 
upon their own initiative, and very rarely indeed is the result of 
any examination made by them the cause of financial upheaval. 

The subject of stability in an insurance corporation is of as 
great, if not greater, importance to business men as the integrity 
of the individual bank, because when the merchant or manufac¬ 
turer is unable to secure sufficient absolutely reliable insurance 
to fully protect his property his ability to secure advances upon 
goods is seriously curtailed, and his credit and fortune may, in 
case of fire, be impaired, if not destroyed. 

In this connection we submit that the statements of officers of 
banks are not alone sufficient to secure a certificate of substan¬ 
tiality, but that such statements are supplemented by examination 
by banking departments. Banks that are found to he perfectly 
solvent are thereby strengthened in public confidence, while those 
that are insolvent are precluded from further damage to the people. 

We submit that our citizens have the same right of guarantee 
as to the stability of the insurance companies with whom they are 
forced to do business, and to whom millions of dollars are an¬ 
nually paid for protection, because the public confidentially ac¬ 
cept their policies upon the theory that our Insurance Department 
not only has the statement of the officers of the corporations but 
supplements the same by investigation which justifies the issuing 
and retaining of certificates as to their soundness and integrity. 

28 


434 


Senate Judiciary Committee. 


We further note the statement in your letter that u it is not 
regarded as unfair to other policy-holders or corporations that 
disputed liabilities be legally established before the corporation is 
condemned as insolvent,” and in this connection beg to say that 
in the judgment of this Committee the recognition of the right to 
promiscuously deny liability seems to put a premium upon the 
denying of such liability. You admit that a duplication of the 
loss at San Francisco would ruin a large number of the com¬ 
panies, “ which, although now embarrassed, will extricate them¬ 
selves, having all the probabilities in their favor, but you seem 
to overlook the fact that stockholders should not be permitted to 
recoup their losses by continuing business in a weakened and in¬ 
solvent condition and selling to the public policies that do not 
surely insure against loss under all conditions. 

We learn from the public press that some of the companies 
now admit that their San Francisco losses are very much greater 
than the amount shown in the returns to your Department, and 
are therefore endeavoring to liquidate their claims upon the per¬ 
centage basis, while others are resorting to the organization of 
subsidiary corporations portions of the new capital stock being 
given in liquidation of loss claims against the old or parent cor¬ 
poration, to relieve them of responsibility. 

In view of this'condition, one can only imagine what the situa¬ 
tion would be in the United States if a disaster similar to the San 
Francisco conflagration, but of far less magnitude, should again 
in the near future visit the United States, as it has visited Chili, 
while in the meantime the Insurance Commissioners are waiting 
for the insurance corporations to make up their minds whether 
they are bankrupt or not. 

In view of the far-reaching ramification of this subject and its 
vital importance to commercial life, we trust that your Department 
will give immediate attention to the present needs of the citizens 
of the State of Yew York, so that they shall know that when a 
certificate of character is given to a fire insurance corporation, 
or when such a corporation is permitted to transact business under 
a certificate heretofore issued, it positively indicates that such 
corporation is, to the knowledge of the Department itself, abso¬ 
lutely sound and solvent and worthy of the confidence of the 
people. 

In conclusion, we respectfully renew our recommendation that 
your Department take immediate action to ascertain which of the 


Testimony of Mb. Kelsey. 


435 


companies are no longer qualified to do business in this State 
under the requirements of the Department as to solvency. In our 
opinion, this can be done without creating any unnecessary ex¬ 
citement or undue alarm, and can only result in re-establishing 
absolute confidence in the integrity of the policies issued by the 
companies permitted to continue in business. 

Very respectfully yours, 

PHILIP S. TILDE X, Chairman, 
EDSOX H. SAYRE, 

W. E. CLEARY, 

ALBERT PLAUT, 

ALEX. ROBB, 

Committee on Insurance and Fire Regulations, New York Board 
of Trade and Transportation. 

August 28, 1906. 

Philip S. Tilden, Chairman, 203 Broadway, New York. 

Dear Sir.— I beg to acknowledge the receipt of your favor 
dated the 25th instant. 

I do not disagree with your position as to the duty of this 
Department in relation to the supervision of fire insurance com¬ 
panies, and feel that you have misapprehended portions of my 
former reply to your inquiry. The Department will as promptly 
as possible investigate every company where cause therefor exists 
and will esteem it a favor to receive information from any source 
as to an existing necessity, and does not ask private citizens to 
render service which the law requires of public officers. 

The complicated questions arising from the San Francisco dis¬ 
aster are receiving unremitting attention from the Department and 
no effort will be spared to safeguard the interests of our people. 

Our investigations proceed upon such advices as are obtainable 
but radical action must necessarily depend upon facts developed. 
The situation is not drifting past an idle Department, as to some 
extent your communication implies, for men can be diligent with¬ 
out jeopardizing important results by imprudent advertising in 
the newspapers. 

I assure you of my sincere regard and of a readiness to accept 
any suggestion offered for guidance which commends itself as 
likely to be of assistance for the public good. 

Very respectfully, 

OTTO. KELSEY, 

Superintendent . 



436 


Senate Judiciary Committee. 


NEW YORK BOARD OF TRADE AND TRANSPORTA¬ 
TION. 

203 Broadway, New York, August 31, 1906. 

lion. Otto Kelsey, Superintendent of Insurance, Albany, N. Y. 

Dear Sir.— Please accept thanks for your prompt reply to our 
letter of the 25th inst. We are -glad to know that “ the Depart¬ 
ment will as promptly as possible investigate every company 
where cause therefor exists,” and that “ the complicated questions 
arising from the San Francisco disaster are receiving unremitting 
attention from the Department.” 

Our previous communications were not predicated upon the 
belief that the situation was “ drifting past an idle Department;” 
our purpose was to secure such action by your Department as will 
preclude the possibility of our business men paying for policies 
of tire insurance which do not insure. 

We fully agree with your proposition that men “ can be diligent 
without jeopardizing important results by imprudent advertising 
in the newspapers,” and as evidence of this we have refrained 
from giving to the public press, though importuned to do so, anv 
of the correspondence between this Committee and your Depart¬ 
ment, and we shall continue this policy until such time as we 
receive your authority to depart from it. 

With assurances of the highest esteem, I am, 

Very respectfully yours, 

(Signed) PHILIP S. TILDEN, 
Committee on Insurance and Fire Regidations. 

Q. Did vou write that letter vourself ? A. I did. 

By Senator Hinman: 

Q. Did you dictate it? A. I wrote it in lead pencil first and 
the stenographer copied it. 

By Mr. Hatch: 

Q. Did you write both of the replies which have been read bv 
Attorney-General Mayer? A. I did. 

By Senator McCarren: 

Q. Mr. Kelsey, with regard to those matters referred to in those 
letters just read, do you feel that time has vindicated your action 
and judgment? A. It has justified me entirely. 


Testimony of Mr. Kelsey. 


437 


By Mr. Hatch: 

Q. Did you have any reason to suspect, Mr. Kelsey, that there 
was an ulterior motive, from any information you received, to 
benefit large and strong companies at the expense of smaller com¬ 
panies during the course of that investigation ? A. I felt that 
that was included in the request. 

Q. And you took that into consideration ? A. T did. 

By Senator Page: 

Q. Does that refer to these particular requests that have been 
read in evidence, or to the general requests that were received — 
others that have not been read in evidence ? A. To all. 

Q. That is, to Mr. Moore and the New York Board of Trade 
and Transportation ? A. Yes, and there were many others. There 
were constant inquiries, very much in the same line, but not so 
elaborate, all of them. 

Mr. Hatch.— I doubt very much if Mr. Kelsey catches the 
drift of your question. 

By Mr. Hatch: 

Q. Did you, Mr. Kelsey ? The things which excited your sus¬ 
picion that there might be some ulterior motive. As I understand 
Senator Page, he desires to know whether you refer to the letters 
of Mr. Moore and the New York Board of Trade and Transpor¬ 
tation, which have been read, or to other information, which was 
laid before you. A. I was satisfied that to some extent they orig¬ 
inated from a certain class of interests. There were a number of 
that class of letters, as well as personal requests. 

By Senator Grady: 

Q. And that such interests were alli6d with the stronger com¬ 
panies? A. With the biggest ones, yes, sir. 

By Mr. Hatch: 

Q. Now, have you a letter there of — do you recollect a com¬ 
munication from Mr. Mead, the secretary of the Merchants’ As¬ 
sociation ? A. I do. 

Q. Is that the communication which I show you (handing 
paper to witness) ? A. Yes. 

Mr. Hatch.— I desire to offer that in evidence. 

(Admitted and marked Exhibit No. 123.) 




438 Senate Judiciary Committee. 

%• 

Q. Now, I show you another letter. This is part of the same 
(handing paper to witness) what is that ? A. It is a second let¬ 
ter from Mr. Mead under date of August 3d. 

Q. And your reply attached ? A. Yes, sir. 

Mr. Hatch.— Now, I desire to offer that also. 

(Admitted and marked Exhibit No. 124.) 

(At the request of Mr. Hatch, Mr. Mayer then read Exhibits 
Nos. 123 and 124 to the Committee.) 

Said exhibits are as follows: 

Exhibit No. 123: 

THE MERCHANTS’ ASSOCIATION OF NEW YORK. 

346 Broadway, Cor. Leonard St., July 26, 1906. 

Hon. Otto Keesey, Superintendent, State Insurance Depart¬ 
ment, Albany, N. Y. 

Dear Sir.— We are informed by the chairman of the Com¬ 
mittee on Eire Insurance of this Association that it is current 
talk in insurance circles that a number of fire insurance com¬ 
panies, badly impaired, if not bankrupt, are being permitted to do 
business in this State. 

Enclosed herein you will please find a clipping taken from 
“ The Journal of Commerce and Commercial Bulletin,” of its 
issue of the 25th instant, which contains a dispatch from Chicago 
in 'which allusion is made to rate cutting by companies that have 
been so hard hit by the San Francisco conflagration that they 
are reckless of the consequences. From the same clipping you 
will note that the president of the Home Fire and Marine In¬ 
surance Company, of San Francisco, admitting the insolvency of 
his own company, says: “ Many of our reinsurers who at first 

were as confident of their ability as we were of ours may be able 
to pay only a fraction of their losses. From information received 
it is believed that some of these insolvent companies continue to 
do business in the East and to make prompt settlement of small 
losses, while their adjusters on the Pacific coast are doing every¬ 
thing in their power to scale down claims and defer Settlements 
on the plea of inability to pay in full. 

This is a matter of the gravest importance to the commercial 
interests of this city, so largely represented in the Merchants’ 
Association. Property owners generally look to the Insurance 


Testimony of Mr. Kelsey. 439 

Department of the State of New York to protect them, by pre* 
venting these insolvent companies from doing business within 
this State. 

The sworn statements of conflagration losses^ filed with your 
Department, doubtless furnish you with sufficient information to 
determine which companies are still responsible and entitled to 
continue business. The showing made in these statements is 
naturally as favorable as it is possible for the companies to make, 
and the conditions developed by settlement of losses are apt to be 
worse rather than better. 

It would seem, therefore, that your Department should now 
be in a position to determine the status of companies now author¬ 
ized to do a fire insurance business in this State, and to protect 
the people of the State from the continued operation of such 
companies as may have recently been insolvent. 

On behalf of the association and of our Committee on Fire 
Insurance, we therefore respectfully request you to cause an exam¬ 
ination to be made into the present condition of the fire insurance 
companies authorized to do business in this State, and to advise 
us as to the results arising from such an examination. 

We would he pleased to receive from you an assurance that 
this will be done forthwith, and that no insolvent fire insurance 
company is being permitted to do business, or will be permitted 
to do business in this State. 

Yours respectfully, 

-43. C. MEAD, 

Secretary, the Merchants’ Association of New York. 

July 27, 1906. 

Mr. S. C. Mead, Secretary, the Merchants Association of New 
York, 346 Broadway, New York City: 

Dear Sir.— Your letter of the 26th instant with suggestions as 
to the duty of this Department in the matter of fire insurance, is 
received. 

We have already been apprised through official sources of the 
facts stated in your letter. The verified statements from the 
several insurance companies made as of June 30, have been tabu¬ 
lated and are in the hands of the printer and will be ready for 
distribution within a few days. A copy will be forwarded to you. 
These statements do not determine the condition of the companies. 


440 


Senate Judiciary Committee. 


The Department will endeavor to discharge its full duty under 
the statute and as required by its obligation to the people and I 
trust to your satisfaction, but does not feel at liberty to make 
announcements of its intent or methods of procedure. We do not 
feel that personal assurances ought to he necessary that a public 
official will endeavor to efficiently perform his duty where it is so 
plainly discernible. 

Very respectfully yours, 

OTTO KELSEY, 

Superintendent. 


Exhibit No. 124: 

THE MERCHANTS’ ASSOCIATION OF NEW YORK.* 

346 Broadway, Cor. Leonard Street, August 3, 1906. 

Hon. Otto Kelsey, State Superintendent of Insurance, Albany, 
N. Y. 

Dear Sir.— Will you kindly cause to be forwarded to us a half 
dozen copies of the tabulation issued by you under date of July 
28, based upon the sworn statements as of June 30, as to the 
losses sustained in California by insurance companies doing busi¬ 
ness in this State. 

Our Fire Insurance Committee has requested me to go to 
Albany to see you in reference to our previous correspondence, 
and if convenient I will come on Tuesday next. Kindly advise 
me as to whether it will be convenient for you to see me on 
that day. 

Yours very truly, 

S. C. MEAD, 

Secretary, the Merchants Association of New York. 

August 4, 1906. 

Mr. S. C. Mead, Secretary, The M er eh ants'' Association of New 
York , 346 Broadway, New York. 

Dear Sir.— Your letter of the 3d instant is received. Agree¬ 
able to the request therein contained we send you under separate 
cover one-half dozen copies of our circular letter of the 28th 
ultimo, regarding San Francisco losses. 



Testimony of Mr. Kelsey. 


441 


Superintendent Kelsey is absent from the Department to-day. 
lie will return to Albany Monday when your letter will be brought 
to Ins immediate attention. Ho will advise with you regarding 
the personal interview for Tuesday next. 

Respectfully yours, 

HENRY D. APPLETON, 

Second Deputy Superintendent. 


TELEGRAM. 

* 

t V 

Albany, August 6, 1906* 

Mr. S. C. Mead, Secretary Merchants’ Association of New York, 

346 Broadway, New York City. 

Will be at Department all day to-morrow. AVill see you at your 
convenience. 

T OTTO KELSEY, 

Collect. Superintendent. 

By Senator McCarren: 

Q. I suppose, Mr. Kelsey, that it is fair to assume that at 
about the time of the writing of these letters you were impressed 
with the industry of the Committee on Rumors ? A. I was aware 
of it, at least. 

By Mr. Hatch: 

Q. Did you see Mr. Mead ? A. I did. 

Q. What conversation did you have with him? A. I don’t 
remember the details. We discussed generally the situation re¬ 
ferred to in his letters. I remember when he came in he opened 
the conversation — I was personally acquainted with him — by 
asking whether the Merchants’ Association and my Department 
were working at cross'purposes. I told him I hoped not. Lie sat 
down and we discussed the situation for a half or three-quarters 
of an hour. 

Q. Did you arrive at any conclusion that was other or different 
than is stated generally in this correspondence ? A. We did not. 

Mr. Hatch.— I desire, before I forget it, to close up the cor¬ 
respondence. I show you a copy of a letter that was transmitted 





442 


Senate Judiciary Committee. 


« 


to you by Governor Higgins and which has been referred to in the 
correspondence with Mr. Moore. Hoes that show what disposition 
was made of that letter? 

The Witness.— It does. 

,Q. Will you read it? A. (reading): “ My Hear Governor: 
I return herewith letter from Mr. C. A. Moore, dated August 
15th and addressed to you, which ^comments upon a letter recently 
sent by this Hepartment to you in relation to the present fire in¬ 
surance situation. I am greatly obliged for your courtesy in the 
matter. Respectfully yours, Otto Kelsey, Superintendent.” That 
is dated August 21, 1906, and addressed to the Governor. 

Q. And the letter of the Governor to you is dated August 20th ? 
A.' Yes. 

Q. I show you another paper, Mr. Kelsey (handing paper to 
witness) ; what is that ? A. It is some correspondence- 

Q. A circular of the Continental Fire Insurance Company? 
A. It is. They were put together so I did not get the connection. 
There is a copy of a letter from me to Mr. Henry Evans, the 
president of the Continental, acknowledging receipt of his letter 
with the enclosure mentioned. 

Mr. Hatch.— I desire to offer this in evidence. (Admitted and 
marked Exhibit Ho. 125. Mr. Mayer then read Exhibit Ho. 
125 to the Committee, and same follows) : 

Rooms 89, 90, and 91 Heeger Building, 

1169 Broadway, Oakland, Cal., May 1, 1906. 

Mr. C. R. Tuttle, Assistant Secretary, Continental Insurance 
Co., Chicago, III. 

Hear Sir.— The companies are all talking big and trying to 
keep up their spirits, but fully fifty per cent, of the companies 
will retire before the close of the year, either by reinsurance, fail¬ 
ure, or, in the case of English and German companies, go home. 

Mr. Bement, of the Home, stated to me this morning that the 
Eastern officers and managers had no conception nor idea of the 
extent of the San Erancisco fire and the earthquake, and that most 
of them believe they could defeat claims, or certainly cut them 
down to a great extent, by taking advantage of the falling build¬ 
ing clause in the policies. In his judgment, this clause will not 





Testimony of Mb. Kelsey. 


443 


be worth two per cent, to the companies, for such a small propor¬ 
tion of the buildings were appreciably damaged by the earthquake. 

Yours very truly, 

(Signed) G. E. KLINE, 

Vice-President. 


HOW TO GET “ CONFLAGRATION PROOF ” FIRE 

INSURANCE. 

Especially important to all having property to insure includ¬ 
ing farmers, merchants, mill owners, manufacturers, holders of 
mortgages, saving banks, life insurance companies, trust com¬ 
panies, executors, administrators, etc. 

N. B.: A careful reading of this circular will consume about 
five minutes and its persual, before insuring your property, will 
be well worth at least that much of your time. 


Une hundred insurance companies failed in the great fires of 
Chicago and Boston. The sufferers by the failure of these com¬ 
panies were of two classes: 

First, Those policy-holders- whose property was destroyed and 
who, if they received any money at all, received it diminished 
fry expenses of bankruptcy and in petty installments extended 
through years of delay; and 

Second, Those whose property was not destroyed, but who were 
compelled to seek for other, and often doubtful insurance, at a 
time when it was impossible to tell which companies were good 
and which were not good. Many did not learn of the failure of 
the companies whose policies they held until after their own 
property had been burned and they had sought to collect the insur¬ 
ance which they had supposed reliable, but found to be not so. 

The aggregate of the unearned premiums of a company on its 
policies in force, is often a large sum. In the case of the Con¬ 
tinental, for instance, it amounts to over six millions of dollars — 
a fund sufficient to protect all of its policy-holders if held intact 
lor their security. Under existing laws this fund is not liable 
for anv fire, no matter how large, but is held to be due to those 
whose policies are in force, hut as nothing is gained by paying it 
back in small installments to those holding policies, the question 




444 


Senate Judiciary Committee. 


naturally enough arose, why not hold it safely invested for their 
security, and relieve them of the necessity of seeking for other 
insurance at a time when safe insurance is hard to find and when 
rates are unusually high. Those whose property is burned in a 
great fire being entitled to no part of it, why .not hold it for 
the security of those to whom it alone belongs — the multitude 
outside of the part burned of some city — farmers, mill owners, 
merchants and property holders everywhere else. 

The Safety Fund Law does this. It prevents the failure of 
a company by great conflagrations. It does not leave that large 
proportion — probably 99 *out of each 100 — of policy-holders 
those owning property outside of the burned district to be with¬ 
out protection in case of such a fire, but immediately sets aside 
for the loss claimants more than other laws compel companies 
to have for their payment, including a full capital, and an addi¬ 
tional sum accumulated by the provisions of this law out of the 
pi outs of prosperous years, known as the guaranty surplus fund, 
and secures that larger number whose property is not destroyed, 
by setting aside the fund of unearned premiums, together with 
the special reserve fund, a fund which may be regarded as con¬ 
tributed by the stockholders of the company out of their divi¬ 
dends, for the continuance of the company and the protection 
of policy-holders. 

The Safety Fund Law restricts dividends to seven per cent, 
per annum on the capital and surplus funds until the two funds 
equal the capital, and requires that all that remains of its income 
from investments and all of the profits of its business of insur¬ 
ance shall be accumulated each year and divided equally into two 
funds — the Guaranty Surplus Fund, before mentioned, appli¬ 
cable with the capital of the company, to the payment of losses by 
any great fire, and the Special Reserve Fund which, with the un¬ 
earned premiums on policies in force, is held to protect those not 
involved in the fire. If the Special Reserve Fund does not 
amount to $500,000 or more, the stockholders of the company 
must pay in enough to make it up to that sum, the Insurance De¬ 
partment holding the amount, whatever it is, to guarantee full 
security to policy-holders whose property is not burned in such 
great fire. 

It is this same Special Reserve Fund which will keep the 
company out of the hands of a receiver and enable it to pay its 
losers in the great fire without shrinkage, costs or delays, the 





Testimony of Mr, Kelsey. 445 

full sum coming to them out of the funds provided for their 
payment. 

A company is compelled by the Safety Fund Law to accumulate 
the profits of prosperous years, when no great fires occur, to meet 
the losses of a great fire when it comes, and is thus in the secure 
position of a thrifty and economical farmer whose well-filled 
barns and savings, after years of plenty, prepare him for the time 
of famine. 

Ihe law is not compulsory upon all companies, but only upon 
those voluntarily placing themselves under its wise provisions. 
Once submitting to it, however, they cannot withdraw, but are 
committed to a conservative course. 

We have entered upon the thirtieth year since the law was 
passed, and out of the large number of companies which might 
have ‘ complied with it, only eleven have thus far done so, and 
of these the Continental was the first and largest. 

It would seem that none of those who have not complied with 
the law ought to object to it. Where they do their objections can 
only be explained on the ground, that, like the fox in the fable, 
they desire all other companies to be in the same curtailed con¬ 
dition as themselves —• liable to be without surpluses to meet the 
great fires which, if we may judge from the past, must inevitably 
occur in the future. The argument that without this law a com¬ 
pany" can restrict its dividends and provide for the security of 
its policy-holders is good as far as it goes hut it should be 
remembered that under the Safety Fund Law they must do so; 
and, while a company under any other law may accumulate a sur¬ 
plus, its stockholders can, at any time, change their minds, and 
divide the profits among themselves, either in stock dividends or 
in cash. Under the Safety Fund Law neither of the surplus funds 
can be divided among stockholders, both have to be held for the 
security of policy-holders so long as a policy remains in force. 

When the news of the Chicago fire reached a small town in 
Illinois, the cashier of a bank in the place, a very generous man, 
went at once to his baker’s and ordered him to prepare and 
forward to the sufferers in the burned city, quantities of bread, 
poultry and other food. 

“ It is impossible,” said the baker, “ for your wife has been 
here to give a similar order, and my ovens are full.” 

Pleased to discover that his good wife had anticipated his liber- 
alitv, he walked home and was mot at the gate by his little girl 



446 Senate Judiciary Committee. 

dressed in her best clothes, while at the door a few steps further 
on he met his wife afrayed in her best silk. 

“ Why, my dear,” he inquired, “ are you going to a party ? ’ 

“ Oh, no,” was the reply. “ You see, I have sent all of our 
clothes to Chicago for the poor people who have been burned out, 
and we will have to wear our best clothes for a few days until we 
can get others made! ” 

The cashier smiled. “ Well, wife, it is all right. It is very 
generous of you, and I quite approve of it all, but suppose some 
other great city should burn — do you think we could stand an 
encore ? ” 

The Continental paid more than $1,700,000 in Chicago, and, 
one year later, $500,000 in Boston. During the year separating 
these two great drains upon its resources, it paid its regular an¬ 
nual losses of nearly a million more; and when the next great fire 
comes, no matter in what city, the wise provisions of the Safety 
Fund Law will enable it to repeat these great efforts to protect its 
thousands of policy-holders everywhere, and to stand repeated 
“ encores.” 

The Safety Fund Law makes the policy of a company comply¬ 
ing with it more valuable than that of another not complying with 
it; but, although the Continental has accumulated over eight 
millions of dollars surplus already, much of which it might have 
divided among its stockholders as profits in dividends, it does not 
charge any more for its policies than other good companies ought 
to charge. 

(From the “ Insurance World,” March 8, 1904.) 

The conflagrations in Chicago in 1871 and in Boston the follow¬ 
ing year were so disastrous to fire insurance companies and so 
many were unable to continue in business that a movement was in¬ 
augurated in Yew York State two years later to insure the per¬ 
petuity of companies already in the field. In 1874 the Yew York 
Legislature, largely at the instance of George T. Hope, then presi¬ 
dent of the Continental Insurance Company, passed an act known 
as the Safety Fund Law. It was optional with a company 
whether it qualified thereunder or not, but if it did so it must 
limit its dividends to stockholders to 7 per cent, per annum until 
such time as its safety fund equalled the amount of its capital 
stock. The companies accepting these requirements were at the 
time bitterly assailed through the general press by those who did 
not care to conform thereto. 



447 


Testimony of Mr. Kelsey. 

Under the above act it was made possible for a company with 
a capable underwriter at the bead to obtain a well nigh im¬ 
pregnable position in the fire underwriting field. Stockholders 
will persist in taking down dividends as long as there is an op¬ 
portunity, whereas there is not an underwriter that could not, 
bad be desired, secured the consent of bis board of directors to 
limit the dividends at that time, following as closely as it did the 
disastrous years of 1871 and 1872. We could not forego a 
thought in this direction when it was announced that the Green¬ 
wich bad retired from the underwriting field. It was located in 
the best agencies of the States in which it transacted business. 
Years were taken to develop such a magnificent plant, which could 
hardly be placed at a money value. Why was the Greenwich un¬ 
able to weather the gale? In 1872, the year following the Boston 
fire, 28 per cent, dividend was paid; 1873, 29 per cent.; 1874, 
the year the Safety Fund Law was enacted, 50 per cent.; 1875, 
55 per cent.; and during the next nine years 30 per cent, per 
yeaj. During these eleven years following the enactment of the 
Safety Fund Law the company could have paid a reasonable 
dividend to its stockholders and still have increased its surplus by 
nearly $600,000, in other words, the latter amount went to the 
stockholders in addition to a fair return on their money. What 
is the result? When the company meets a squall those same stock¬ 
holders would rather see the good ship go down than come to the 
rescue in time of distress, notwithstanding the fact that they were 
responsible for its present condition. Expressions of regret at 
the retirement of the Greenwich are universal and had it complied 
with the terms of the Safety Fund Law it would have been in suc¬ 
cessful operation to-day, with stock values greatly enhanced over 
those at the time of retirement. 

The Continental complied with this law in 1874, being the first 
to place its policy-holders under the protection of the law. In 
compliance with the law, it maintains a deposit with the Insurance 
Department at Albany of securities of the value of over $000,000. 


By Mr. Hatch: 

Q. Did you have, Mr. Kelsey, a large volume of correspondence 
with the superintendents of other States and policy-holders in 
connection with the San Francisco fire? A. There was a great 

deal. 


448 


Senate Judiciary Committee. 


Q. And those letters are on the tiles of the Department? A. 
Yes. 

Q. And are widely scattered under different heads ? A. Yes. 

Q. Can you state about the extent and volume of that corre¬ 
spondence ? A. I could not. 

Q. I now reach, Mr. Kelsey, the results of your administration 
of the fire losses resulting from the San Francisco fire, as it affects 
the companies, tested by the actual results now of your adminis¬ 
tration. Can-you tell me of the New York companies, if any 
went into the hands of a receiver ? A. One. 

Q. Which one? A. The North German. 

Q. And that went into the hands of a receiver when ? A. No¬ 
vember, I think. 

Q. November, 1906 ? A. Yes, sir. 

Q. What is its present condition ? A. It is in the hands of a 
receiver — insolvent. 

Q. And is in process of liquidation ? A. It is. 

Q. Was there any other company — who examined that com¬ 
pany, Mr. Kelsey ? A. Mr. Vanderpoel. 

Q. And did you have a report upon it ? A. I did. 

Q. And was, that report transmitted to the Attorney-General? 
A. It was first transmitted to the company under the statute. 

Q. Yes. A. For their inspection. They asked for a hearing 
and subsequently a date was fixed and they appeared with counsel 
at the Department. 

Q. And was the hearing had before you ? A. It was. 

Q. What was the result of that hearing? A. That they asked 
for various corrections in the report of the examiner. 

Q. Yes. A. And I think the report was modified in its phrase¬ 
ology in a few respects and w^as then filed. 

Q. Then what happened ? A. It was transmitted to the Attor¬ 
ney-General and proceedings were instituted for a receiver. 

Q. You determined that the capital of the company was im¬ 
paired. A. The report showed it. 

Q. I show you a paper (handing paper to witness); what is 
that? A. This is the report of that examination of the North 
German. 

Q. Made by whom ? A. By Mr. Vanderpoel. 

Q. Is that the report upon which you acted? A. It is. 

Q. And which was the subject of discussion at the time this 



Testimony of Mr. Kelsey. 449 

insurance company appeared before yon ? A. It was a draft of 
the same report. I think there were slight changes in the ver- 
biage, not in the substance at all. 

Mr. Hatch.— I offer that in evidence. 

(Admitted and marked Exhibit 126.) 

Mr. Mayer.— This is the report of Isaac Vanderpoel on the 
examination of the Horth German Fire Insurance Company of 
Hew York and contains the outline of the situation in regard to 
that company, showing, in brief that the company was insolvent. 
Exhibit 126 reads as follows: 

.Report on examination of the Horth German Eire Insurance 
Company of Hew York, dated October 3, 1906. 

October 5, 1906. 

Me. Adolph Loeb, President , North German Fire Insurance 
Company of N. Y 2 Liberty Street, New York City, N. Y. 

Dear Sir.— I hand you herewith a copy of the report on exam¬ 
ination of the condition and affairs of your company made by this 
Department under date of the 3d instant. 

The hearing which is accorded you under the statute before the 
original report is placed on file, is fixed for Tuesday the 9th in¬ 
stant at 11:30 a. m. at this office. 

Yours respectfully, 

OTTO KELSEY, 

Superintendent. 


IHSURAHCE DEPARTMEHT, 

Hew York, October 3, 1906. 

Honorable Otto Kelsey, Superintendent of Insurance, Albany, 

N. Y. 

Dear Sir.— I beg to report that the examination of the Horth 
German Eire Insurance Company of Hew York, requested to bo 
made by your appointment Ho. 1822, has been completed. The 

29 




450 


Senate Judiciary Committee. 


date to which the examination was made was June 11, 1900. 
The condition of the company on that date is shown to be as 
follows: 

* ASSETS. 

Mortgage loans. $48,500 00 


Bonds Owned by the Company June 11, 1906. 

Par value Market value 

Union Pacific, 1st mtg., 

1947—4$ 


U. S., 1930—2$. 

Metropolitan Westside Ele¬ 
vated, gold, 1938—4$. . 
Southside Elevated Ry., 

gold, 1924— 4:V2^> . 

Norfolk & Western Ry. 

Co., gold, 1996—4$ . . . 
Balt. & Ohio Ry. Co., gold, 

1948—4$ . 

Cent. Pacific Ry. Co., 

gold, 1949—4 io . 

Missouri, Kan Tex. Ry. 

Co., gold, 1990—4 c f>. . . . 
Northern Pacific Ry. Co., 

gold, 1907—4 *f> . 

Chicago, Rock Island & 
Pac. Ry. Co., gold, 1988 
—4$. 


$25,000 

$20,125 

00 

25,000 

25,875 

00 

24,000 

22,320 

00 

o 

o 

o 

o 

5,125 

00 

5,000 

' / 

5,025 

00 

5,000 

5,162 

50 

5,000 

5,043 

75 

o 

o 

o 

VO 

5,000 

00 

5,000 

5,237 

50 

5,000 

5,137 

50 


$109,000 $110,051 25 $110,051 25 


Cash in bank. 95,414 85 

Agents balances (uncollected premiums). 122,456 90 


Total assets 


$376,423 00 




























451 


Testimony of Mr. Kelsey. 

LIABILITIES. 

Ket amount of unpaid losses, other than undeter¬ 
mined liability, disclaimed by company, on its 
risks in destroyed district of San Francisco. .. . $109,935 00 

Unearned premiums. $311,859 01 

Less paid 'Cosmopolitan Fire Insur¬ 
ance Co. of New York for rein¬ 
surance . 100,000 00 

- 211,859 01 

Money advanced by Adolph Loeb & Sons. 10,000 00 

Due for reinsurance, $722.30; taxes due, $566.10. 1,288 40 


Liabilities, except capital. $333,082 41 

Capital. 200,000 00 

Total liabilities. $533,082 41 


The amount of unpaid losses other than those growing out of 
the San Francisco conflagration was $109,935^ In addition to 
this sum the risk involved in that portion of San Francisco that 
was destroyed by the recent conflagration, less reinsurance thereon, 
is $740,311.55. On its policies issued on property in this dis¬ 
trict the company disclaims liability, by reason of certain pro¬ 
visions contained in its policies of insurance there issued. I hand 
you herewith the form of policy referred to. Printed upon it by 
way of a title is an indorsement to the effect, that it is the 
“ Standard Fire Insurance Policy of the State of New York, 
New Jersey, Connecticut and Rhode Island.” A reference to the 
form in question will show that this is not the case. It differs 
materially and in essential particulars from tin 1 standard form its 
title represents it to be. The company disclaims liability under 
its contracts covering in the burned district of San Francisco and 
has reinsured its risks outside of California in the Cosmopolitan 
Fi re Insurance Company of Yew York, a corporation recently 
organized, and had paid over to the reinsuring company at the 
date of this report $150,000 on account, in payment of said re¬ 
insurance. There would seem to be a reasonable doubt as to 
whether a liability in San Francisco may not exist should this 
question be brought before the courts for adjudication. I think 
it is at least an open question whether or not this corporation 


T 













452 


Senate Judiciary Committee. 


under its policy contract covering risks in the destroyed district 
of San Francisco may disclaim all liability for loss thereunder. 
It has not as yet, so far as I am aware, undertaken to make any 
investigation looking towards a separation of damage to property 
insured by it in San Francisco, as between damage resulting from 
earthquake and that caused by fire. I make this reference in 
connection with provision in policy contract from lines 28 to 35, 
undertaking to exempt the company from liability from loss from 
various causes, including earthquake, “ unless fire ensues and, in 
that event, for the damage by fire only.'’ 

I have called your attention to the above for the reason that my 
omission to charge the North German with any liability in San 
Francisco without further comment or reference to the company’s 
possible liability there, would be a questionable if not improper 
treatment of this item. 

The records and books of the company were in many instances 
incomplete or lacking. In the latter case they were found to be 
at the office of the company’s general agents for the United States, 
in Chicago, though they were properly home office records and 
should have been available for reference there at any time. The 
company has been largely if not altogether conducted by these 
general agents, Messrs. Adolph Loeb & Son, of Chicago, who have 
used it as a feeder in their business as fire insurance agents. A 
copy of their commission contract with the North German is 
enclosed, together with a copy of the contract of reinsurance with 
the Cosmopolitan by which a commission of 25 per cent, is al¬ 
lowed the North German upon the reinsurance premium to be paid 
by it. In addition thereto the further sum of $10,000 was found 
to have been paid to Louis L. Loeb, by authorization had at a 
special meeting of the board of directors of the North German, on 
June 7, 190G, it being then provided that “ the executive com¬ 
mittee were authorized to pay 5 per cent, commission to an inter¬ 
mediary for services rendered in negotiation of reinsurance 
treaty.” What these services may have been, is not apparent. 

Besides disclaiming liability under its policies covering directly 
upon property involved in the San Francisco conflagration, this 
company likewise denies liability that may be indirectly caused 
through its policies of reinsurance issued to other companies on 
their policies covering in the burned district of San Francisco. 

The appraisal of certain parcels of real estate located in the 
ciry of Chicago and mortgaged to the Company has not as yet 


Testimony of Mb. Kelsey. 


453 


been completed. Should the findings reduce the value of these 
realties to an extent requiring a reduction of the figure at which 
the loans are credited above in assets', the same can be subse¬ 
quently made. 

Respectfully submitted, 

(Signed) ISAAC VANDEEPOEL, 

Chief Examiner. 

STATE OF NEW YORK, 1 

County of New York, j Sh ' 

Isaac \ anderpoel, being duly sworn, deposes and says that the 
foregoing report, subscribed by him, is true to the best of his 
knowledge and belief. 

' [seal] (Signed) ISAAC VANDERPOEL. 

Subscribed and sworn to before me 
this ll.th day of October, 1906. 

t/ 7 

(Signed) JOHN J. CUNNINGHAM, 

Notary Public for Westchester County. 

Certificate filed in New York County. 


STATE OF NEW YORK —INSURANCE DEPARTMENT. 


Albany, August 29, 1906. 


I, Otto Kelsey, Superintendent of Insurance of the State of 
New York, do hereby in pursuance of the requirements of the 
Insurance Law appoint Isaac Vanderpoel as a proper person to 
examine into the affairs of The North German Fire Insurance 
Company of New York, and to make a full report to me in writing 
of the true condition of the affairs of said company with a full 
statement of its capital, securities and assets, showing the amount 
and kind of each, and how the same is invested, including the 
amount of said company’s liabilities, absolute and contingent, 
with such other information as shall be deemed requisite to fur¬ 
nish me a perfect statement of the condition of its affairs and of 
the manner of conducting its business. 

In witness whereof, I have hereunto subscribed my name 
and affixed my official seal at the city of Albany, the 
[seal] day and year first above written. 

(Signed) OTTO KELSEY, 

Superintendent of Insurance. 



454 


Senate Judiciary Committee. 


Examinations of Eire Insurance Companies Which Took 
Place During the Period Commencing May 17, 1906, 
and Ending February 1, 1907, Which Chief 
Examiner Vanderpoel Conducted. 

Eagle Fire Company of New York: 

Two examinations on increase of capital. Two examina¬ 
tions on reduction of capital. (In both examinations 
on reduction of capital there was a quasi-verification 
of the company’s assets and liabilities.) 

Cosmopolitan Fire Insurance Company of New York: 

On organization. 

Fidelity Fire Insurance Company of New York: 

On organization. 

Niagara Fire Insurance Company of New York: 

On increase of capital and on reduction of capital. (On 
reduction of capital stock there was a quasi-verifica¬ 
tion of company’s assets and liabilities.) 

Hanover Fire Insurance Company of New York: 

On increase and reduction of capital stock. (On reduction 
there was a quasi-verification of company’s assets and 
liabilities.) - 

North German Fire Insurance Company of New York: 

Ascertaining condition. As a result of this examination 
Superintendent Kelsey issued a requisition upon the 
stockholders to make good an impairment found to 
exist in its capital stock. The stockholders notified the 
Superintendent that impairment could not be made 
good, whereupon the Superintendent referred the Ex¬ 
aminer’s report to the Attorney-General who made 
application to the Supreme Court for the appointment 
of a receiver and such a receiver was duly appointed. 
Phenix Insurance Company of Brooklyn, N. Y.: 

On increase of capital. 

Q. I call your attention to the Dutchess Fire Insurance Com¬ 
pany. State to the committee what occurred with respect to that 
company ? A. The inquiry into its condition from the Department 
began early in my administration. The company’s condition was 
such immediately after the fire, as soon as the apparent losses could 
be ascertained, that we directed it to cease doing any business. 


Testimony of Mk, Kelsey. 


455 


Q. Who gave that direction ? A. I did. 

Q. What did the company then do ? A. It ceased doing busi¬ 
ness. There was very soon after, I think, the organization of a 
new company by many of the same men interested in the old, 
which reinsured portions of its outstanding risks. They took steps 
to go into voluntary liquidation, commenced to pay off their losses 
and compromised with their creditors and endeavored to work out 
of it to the best advantage of all. 

Q. Was that company examined ? A. It was. 

Q. By whom ? A. Examiners from my Department. 

Q. Who were they? A. Mr. Gordon, I think, had charge of 
three or four men in there for two or three weeks at the start. 
Subsequently on two different occasions — one in September, I 
think, and another in October — two examiners each time were 
detailed for two or three days to check up and verify the reports 
that had been sent to the Department. From the time they com¬ 
menced we required them to furnish, in addition to the facts shown 
by the examination — which was adjourned from time to time on 
account of not having the losses where we could definitely ascertain 
them — we required them to send to us a verified statement of the 
financial changes arising from week to week. 

Q. Did they comply with that direction ? A. They did. 

Q. I show you some papers — three of them (handing papers 
to witness); what are they? A. They are the report on the ex¬ 
amination — the final report of ascertaining the condition. 

Q. By whom? A. By the examiners from my Department. 

Q. The examiners that you have mentioned? A. Mr. Parker 
and Mr. McArthur, detailed from Hew York. 

Q. And they are examiners in the Department ? A. Yes. 

Q. And who makes the final report? A. December 21st, by 
Daniel F. Gordon. 

Mr. Hatch.— I offer those in evidence, those three papers. 

The Witness.— July, October and December. 

(Admitted and marked respectively, Exhibits 127, 128 and 
129.) 

Mr. Mayer.— These three papers are the formal reports of the 
examination under the statute. They involve a considerable 
amount of detail which I will not bother the Committee with; they 
are here if any one wants to see them. 

Exhibit 127 is as follows: 



45G 


Senate Judiciaky Committee. 


MEMORANDUM. 

In Re Dutchess Insueance Company. 

At a hearing before the Superintendent of Insurance upon the 
report of examiners made to the Department, held August 27, 
1906, the Dutchess Insurance Company of Poughkeepsie, N. Y., 
appeared by its president, L. H. Vail, and its counsel, J. L. 
Williams. 

It appearing that the total of liabilities as stated in the ex¬ 
aminers’ report is seriously contested by the officers of the com¬ 
pany, and that in no instance has a loss in San Francisco where 
practically all liabilities are located, been established in court; 
that the company since its sworn statement of June 30th, last, 
and since the Department examination which was brought down to 
June 30th, last, shows a betterment in its financial condition of 
$363,000 ; that it is transacting no new business, and in protect¬ 
ing the interests of its policy-holders the management are advised 
of and will observe the opinion of the attorney-general as to the 
use of funds in which all creditors, whether by fire loss or un¬ 
earned premium, have an equal legal right to share it was decided 
to grant the application of the company for an adjournment of the 
hearing to September 6, 1906, at 11 o’clock in the forenoon. 

Q. I show you a letter (handing paper to witness) ; will you ex¬ 
amine that, Mr. Kelsey; what is that letter or correspondence 
there? A. August 22d, a letter from L. H. Vail, President of 
the Dutchess Insurance Company. 

Mr. Hatch.— I offer that in evidence. 

What is next? A. It is a letter from the Superintendent 
acknowledging the receipt and fixing a date for the hearing. 

(Admitted and marked Exhibit No. 130.) 

Q. And that company was where? A. Poughkeepsie. 

Q. In Dutchess county? A. Dutchess county. 

Q. You stated that they reinsured their losses or some of them; 
what company did they reinsure in? A. I think the same men 
were largely interested in the organization of a new company 
called the Dutchess Fire Insurance Company. 

Q. Yes. And did they reinsure, or who did? A. I thought 
that they did; that is my recollection. 


Testimony of Mr. Kelsey. 


457 


Q. Weren’t they reinsured in the New York Fire Insurance 
Company? A. Well, that was a part of it; my recollection was 
that they insured a portion at least of the losses. This seems to 
be an agreement by which they — the New York Fire — 

Q. That is, the New York Fire Insurance Company reinsured 
against the losses of the Dutchess ? 

Mr. Ainsworth.— No, the New York Fire reinsured its business 
with the New Hampshire Fire. 

Mr. Hatch.— Oh, I made a mistake; give me that paper. 

Q. What is the present condition of the Dutchess Fire Insurance 
Company ? A. It stands uncompleted, so far as the final closing 
up is concerned. The report of the examiners shows the exact 
facts, as far as they can be ascertained from the officers and the 
books of the company. They have been, during the months since 
the fire, closing up on amicable agreements and adjustments with 
their creditors and loss claimants the insurance outstanding, and 
they have informed the Department by verified statements that 
everything is settled except, I think, something like forty or fifty 
thousand dollars still remaining, but included in that is about one 
hundred thousand dollars that has been purchased by some one, 
I think, a gentleman by the name of Down, located at Pough¬ 
keepsie. There are no judgments — no actions have been 
brought in court and no proceedings taken by creditors that I am 
aware of, none have been reported. 

Q. That is a purchase of the liabilities of the company? A. 
Yes, the loss claims. 

Q. Resulting from the San Francisco fire ? A. The San Fran¬ 
cisco fire. They had eight or nine hundred thousand dollars — 

I think the latter figure or more-and they claim to have 

adjusted and settled with creditors, with the exception of this 
small balance, aside from the hundred thousand. Mr. Down 
told our examiners — informed them that he held the claims him¬ 
self individually. 

Q. And have you examined as to the correctness of those state¬ 
ments ? A. So far as we could with examiners. 

Q. And that is the present condition of that company ? A. It 
is. The officers claim to be responsible and ready to answer in 
the courts to any creditor for their conduct and to respond for 
anything that is due from the company. They have claimed 
insistently all the time that they were not legally insolvent. 

Q. What date was it that you directed them not to do any busi¬ 
ness? A. It was in July or early in August. 





458 


Senate Judiciary Committee. 


Q. And I believe you stated that they observed that order ? 
A. They did. 

Q. I call your attention to the New York Fire Insurance Com¬ 
pany ; what was the status of that company ? A. That is a com¬ 
pany that reinsured and went out of business. 

Q. Was that involved in the San Francisco fire? A. It was. 

Q. And is that-the paper which I show you (handing 

paper to witness) what is that? A. In response to a request 
from me, the Vice-president of the New York Fire Insurance 
Company inclosed a copy of the agreement they entered into with 
the New Hampshire Company. 

Q. Had you called their attention or had you stopped their 
doing business ? A. I do not recall specifically that company. 

Q. But whatever the condition was, all of their losses in con¬ 
nection with the San Francisco fire were reinsured? A. They 
were reinsured. 

Q. As per terms of that contract ? A. Yes, sir. 

Q. And is that a solvent company in which the reinsurance 
was effected ? A. It is. 

Mr. Hatch.— I offer that contract in evidence. 

(Admitted and marked Exhibit No. 131.) 

Mr. Mayer.—,,This is the correspondence in regard to the re¬ 
insurance in the New Hampshire Fire Insurance Company and 
here is the contract of reinsurance. 

Exhibit 131 reads as follows: 

NEW YORK FIRE INSURANCE COMPANY, 

95 William Street, 

New York, August 29, 1906. 

Hon. Otto Kelsey, Superintendent, 

Department of Insurance, Albany, N. Y. 

Dear Sir.— In compliance with your request of August 28th, 
we inclose herewith a certified copy of the agreement entered into 
between this Company and the New Hampshire Insurance 
Company. 

Yours very truly, 

(Signed) AUG. COLSON, 

Vice-President. 



Testimony of Mr. Kelsey. 


459 


August 30, 1906. 

Mr. Augustus Colson, Secretary, New 4 ork Fire Insurance 
Company, 95 William Street, New York City: 

Dear Sir.— We have received your favor of the 29th inclosing 
copy of reinsurance contract between your company and the New 
Hampshire Fire, made as of May 4th, 1906, and beg to thank; you 
for this attention. 


Respectfully yours, 

OTTO KELSEY, 


Superintendent. 

COUNTY OF NEW YORK, 

STATE OF NEW. YORK, 

Augustus Colson, being duly sworn, deposes and says that he 
is the vice-president of the New York Fire Insurance Company 
of New York and that the attached agreement is a true copy of the 
contract of reinsurance entered into between the New York Fire 
Insurance Company of New York and the New Hampshire Fire 
Insurance Company of Manchester on the 4tli day of May, 1906. 

(Signed) AUGUSTUS COLSON. 



Subscribed and sworn to before me 
this 29th day of August, 1906. 

David G. Waxeman, 

Notary Public for New York County. 


This agreement made this 4th day of May, 1906, between the 
New Hampshire Fire Insurance Company, of Manchester, N. H., 
hereinafter known as the “ New Hampshire,” and the New York 
Fire Insurance Company of New York, hereinafter known as 
the “ New York Fire,” in consideration of the sum of one dollar 
by the parties hereto to the other paid, the receipt of which is 
hereby acknowledged. 

Witnessetii That the “ New Hampshire ” agrees to reinsure 
from 12 o’clock m., standard time, on above date at the place 
where the property insured is located, all unexpired fire and 
lightning risks located in the United States and Canada for the 
amounts not heretofore reinsured, now covered by policies and 
contracts issued by the “ New York Fire ” according to their 
terms and conditions, and to pay all losses thereon occurring after 
the last mentioned hour, and to pay all adjusting and other ex- 


460 


Senate Judiciary Committee. 


penses arising from such risks and all return premiums upon can¬ 
cellation of policies enumerated in the schedules. 

That the “ New York Fire ” agrees to make full and complete 
schedules in duplicate, showing the number of policy, name of 
insured, amount, rate premium, beginning and expiration of all 
risks now insured by the “ New Y r ork Fire ” in the United States 
and Canada, and to calculate and show, in detail and aggregate, 
the pro rata premium for the'unexpired term of each of such risks 
and to deliver as soon as practicable and not later than June 15th, 
1906, unless the date is extended by mutual agreement, to the 
“ New Hampshire ” the full schedules, in duplicate, above re¬ 
ferred to, and after such date the “ New Hampshire ” is to be 
held liable as reinsurer for only such uncancelled risks as shall be 
found entered upon said schedules; said schedules to be delivered 
in installments as rapidly as completed. 

That the “ New Hampshire ” shall have full opportunity to 
verify the schedules, and, so far as necessary for the purpose, shall 
have the right to examine all the books and papers of the “ New 
York Fire,” and the “ New Y r ork Fire ” hereby agrees to deliver 
to said “ New Hampshire ” as installments of the schedules are 
delivered, all policy records and agents’ daily reports of risks 
included in* the above mentioned schedules, and all maps, line 
cards, notices and proofs of loss as received by the “ New York 
Fire ” are to be delivered to the “ New Hampshire.” The maps so 
delivered shall continue to be the property of the “ New York 
Fire ” and shall be returned to it at any time upon demand after 
the “ New Hampshire ” has erased all lines therefrom, but not 
later than July 15, 1906. 

That upon the completion and delivery of the above mentioned 
schedules, the said New Hampshire ” agrees to issue a policy 
or policies of reinsurance upon its printed blanks, the “ New York 
Fire ” in accordance with, and subject to, the provisions of this 
agreement, reinsuring all risks enumerated in the schedule pro¬ 
vided for herein, from 12 o’clock m., May 4, 1906, standard time. 

That in consideration of said reinsurance, the said “ New York 

Fire” hereby agrees to pay to the “ New Hampshire” a sum 

equal to the net amount of the pro rata unearned premium on all 

risks included in the above mentioned schedules; less a deduction 

of 23 per cent, from such pro rata premium which is in lieu of 

any and all charges and allowances, including taxes, assessments 

of all kinds, or other charges of a similar nature, for which the 

\ 


Testimony of Mr. Kersey. 


401 


New York 4ire” is liable. Iwo hundred and thirty-five thou¬ 
sand ($235,000) dollars in New York funds of such payment are 
to be made upon the signing of this contract and the balance due 
to or from the “ New Hampshire ” is to be paid in New York 
funds when the schedules referred to herein are delivered. That 
no policies issued or indorsements made by the “ New York Fire ” 
or its agents after five days from the date hereof, are to be bind- 
ing upon the New Hampshire,” unless the u New Hampshire ” 
gives written authority to make such indorsements, and the “ New 
York Fire ” hereby waives its rights to make any cancellations 


after the completion of the schedules. 

That no expenses for litigation are to be incurred without the 
consent of the New Hampshire,” and all adjustments and liti¬ 
gation of losses shall be under the direction and at the expense 
of the “ New Hampshire ” on all risks included in the above 
mentioned schedules. 

That said a New Hampshire ” or its representatives, is hereby 
authorized to effect cancellations of policies, renewals, certificates 
or entries issued or made by said “ New York Fire ” and for the 
purposes of such cancellations, and for all other purposes under 
the terms of the policies covered by this agreement, including the 
execution of all legal documents connected with losses under this 
agreement is hereby constituted the sole agent and attorney of 
said “ New York Fire.” 

In case of loss under any risk herein reinsured, the “ New 
Hampshire ” upon payment of said loss, is to be subrogated to all 
the rights, claims and remedies which the said u New York Fire ” 
has against any other person or persons, corporation or corpora¬ 
tions primarily liable to the insured for such loss, to recover satis¬ 
faction therefor by right of subrogation to the insured, and the 
said rights, claims and remedies, upon payment by the “ New 
Hampshire ” of such loss, are to be assigned to the said “ New 
Hampshire ” and said “ New York Fire ” hereby agrees with said 
“ New Hampshire ” to assign the same accordingly. 

All disputes which may arise between the two contracting 
parties with reference to the carrying out of this agreement shall 
be settled in an equitable rather than in a strictly legal interpreta¬ 
tion of the provisions of this agreement, and, in such cases, the 
parties agree to submit to the decision of two arbitrators, one to 
be chosen by the “ New Hampshire ” and the other by the “ New 
York Fire ” and, in event of disagreement between these two, 


462 


Senate Judiciary Committee. 


then of an umpire who shall have been chosen by the said two 
arbitrators previous to entering upon the reference. The arbi¬ 
trators and umpire shall be members of the tire insurance busi¬ 
ness doing business in Providence, Philadelphia, Hartford or 
Hew York city, and their decision, or that of the majority of 
them, shall be final, binding and without appeal by the contracting 
parties. The arbitrators are relieved from all judicial formalities 
and may abstain from following the direct rules of law. In the 
event of either party failing to appoint an arbitrator, or of the 
arbitrator neglecting to appoint an umpire within one month after 
the other party has applied for arbitration, in writing, upon the 
question in dispute, or the arbitrators have intimated their in¬ 
ability to agree upon an umpire, then in each and every such case, 
the arbitrator or umpire shall be appointed by the President, for 
the time being, of the Hational Board of Underwriters. The fees 
and expenses of the arbitration shall follow the award. 

In Witness Whereof, The u Hew Hampshire Eire Insurance 
Company ” has authorized these presents to be signed by its Presi¬ 
dent and the “ Hew York Fire Insurance Company,” this 4th 
day of May, 1906. 

HEW HAMPSHIRE FIRE IHSURAHCE CO., 

By F. W. Sargeant (signed), 

President. 


HEW YORK FIRE IHSURAHCE CO., 

By Ciias. A. Hull (signed), 

President. 

Witness: 

« 

(Signed) Sumner Ballard. 

Q. I show you a bundle, Mr. Kelsey, which was reserved 
(handing papers to witness). What is that? 

Mr. Mayer.— That has already been marked in evidence. 

A. Correspondence with the Dutchess in regard to the special 
statements of the San Francisco conflagration. 

Q. And that covers the period of which you have spoken? 
A. It does. 

Q. Did you have frequent personal interviews with the officers 
of the Dutchess Company here in Albany? A. I did, with the 
president and counsel, Mr. Fowler. 



Testimony of Mr. Kelsey. 


463 


Q. Do you know how frequently they were here? A. There 
were several weeks that they were here every Monday. The hear' 
ing was adjourned from week to week for them to come in and 
report personally. 

Q. Did you have an examination of the North German Fire 
Insurance Company? A. I did. 

Q. What was the condition of that company? A. We have 
been through that. 

Q. Oh, yes. Well, I beg your pardon. I show you a bundle 
of papers (handing papers to witness), what are those? A. They 
are examinations on — reports on various companies. 

Q. How many in all ? A. Eleven, if I count correctly. 

Q. And by whom were the examinations made ? A. Well, one 
is — they are appointed as commissioners — Mr. Hunter and 
Mr. Yanderpoel, in regard to the Phenix and the Hanover. They 
are not marked on the outside as they should he — Mr. Yander¬ 
poel as to the Hanover Fire and Niagara — Mr. Hunter joined 
with him in the report of the commissioners. Mr. Hunter and 
Mr. Yanderpoel, the Fidelity. 

By Mr. Mayer: 

Q. The Fidelity Fire? A. The Fidelity Fire. They are in 
regard to increase of capital — most of these. Mr. Hunter and 
Mr. Yanderpoel as to the organization of the Cosmopolitan. 

Q. The Cosmopolitan Fire? A. Yes, they are all fire. Mr. 
Yanderpoel, as to the reduction of capital of the Eagle Fire. 
They increased the capital and then reduced it partly to get sur¬ 
plus. Mr. Yanderpoel again, on the verification of the reduction 
of capital. Mr. Hunter and Mr. Yanderpoel as to the payment in 
of the increased capital — and the same, the Eagle again. 

Mr. Hatch.— I offer that bundle in evidence. 

(Admitted and marked Exhibit No. 132.) 

By Mr. Hatch: 

Q. I show you a bundle of papers (handing papers to witness); 
what are those, Mr. Kelsey ? A. They are statements of the San 
Francisco losses from various companies dated along- 

Mr. Ainsworth.— No, that is not what it is. Just look inside. 

The Witness.— Oh, these are the resolutions from the foreign 
companies providing funds for the payment of San Francisco 
losses, without depleting the amounts deposited here. 








404 




Senate Judiciary Committee. 

Q. What did you do in connection with those foreign insurance 
companies doing business here, of which those resolutions and 
papers which I show you a part? A. There were numerous 
interviews at the outset as to their showing of losses in San Fran¬ 
cisco and the effect it would have upon their capital employed in 
this country. They were very anxious to not have an apparent 
impairment. I arranged or directed that if they would, through 
their home offices, which have immense reserves, provide for the 
transmitting of money to take care of the San Francisco losses 
and not infringe upon the amount of capital kept for the security 
of policy-holders here, that we would accept that without re¬ 
flecting upon or considering them as impaired here. 

Q. Did you consult with anybody as to your policy in that 
respect ? Do you recollect taking it up with the Attorney- 
General ? A. I think I did. We had a number of interviews with 
different representatives of these foreign companies at the De¬ 
partment before the plan was finally determined upon. I believe 
I did consult the Attorney-General in relation to it. 

Q. With respect to whether that would be legal action on your 
part ? A. Yes, whether under the statute I had the authority to 
do it. 

Q. And what advice did you receive from the Attorney-Gen¬ 
eral in that regard? A. He approved of it. 

Q. ITe approved of what? A. He stated that it could be done; 
that it would be legal to make such a provision. 

Q. Then, did you carry that out? A.' I did. 

Q. With what result? Did the companies- A. They did 

provide the money. 

Q. And provided the money in sufficient sums to leave their 
standing here unimpaired ? A. They did. 

Q. On account of their losses? A. They did. 

Q. And that loss upon which you adjusted that, and upon 
which they brought money from their home offices, w^as that based 
upon the apparent losses of the San Francisco fire in which they 
suffered? A. It was sufficient to provide for it, as it was proven. 

Q. Yes, and the basis was upon the report of apparent losses 
they had sustained ? A. I don’t know that they estimated to 
cover the amount originally reported. They transmitted by in¬ 
stallments, is my recollection, but they took care of the losses as 
they were settled and adjusted out there. 



Testimony of Mr. Kelsey. 


465 




Q. And they continued unimpaired so far as they- A. 

They have, to the present time. 

Q. And have paid the losses as they have been established? 
A. I believe they have. I have heard no complaint. 

Q. Do you know that they carried out the plan by which they 
made their security ample ? A. They did. These companies that 
are referred to here did. 

Q. So that there was at all times on deposit here the amount 
of money which the law required ? A. They kept their funds 
here intact. 

Q. And that was pursuant to the statute? A. It was. 

Mr. Hatch.— I desire to offer the resolutions of the foreign 
companies passed in pursuance of the plan just above testified to 
— the resolutions of the foreign companies. 

Senator McCarren.— Were these resolutions passed by the 
directors ? 

Mr. Mayer.— Yes. I will read this as a sample. It is a 
certified copy of a resolution, and has the stamp of the In¬ 
surance Department here on July 5, 1906, duly passed by the 
Board of Directors of the Svea (reading). That also has a cer¬ 
tificate of the United States Consul at Gothenburg in respect of 
the signature. 

(Mr. Mayer then read a list of the names of the companies 
which had passed such resolutions. These resolutions were then 
admitted in evidence and marked, respectively, as follows) : 

Liverpool and London and Globe, Liverpool, England, June 19, 
1906. Admitted and marked Exhibit ETo. 133. 

London and Lancashire, Liverpool, England, June 18, 1906. 
Admitted and marked Exhibit 133-a. 

Svea Eire and Life, Gothenburg, Sweden, June 19, 1906. 
Admitted and marked Exhibit 133-b. 

Sun Insurance Company, London, England, June 19, 1906. 
Admitted and marked Exhibit 133-c. 

Western Assurance Company, Toronto, Canada, July 3, 1906. 
Admitted and marked Exhibit 133-d. 

Law Union and Crown, London, England, June 19, 1906. 
Admitted and marked Exhibit 133-e. 

Union Assurance Society, London, England, June 22, 1906. 
Admitted and marked Exhibit 133-f. 

Eoyal Exchange Assurance, London, England, June 20, 1906. 
Admitted and marked Exhibit 133-g. 


30 








460 


Senate Judiciary Committee. 

Prussian National, Stettin, Germany, June 23, 1906. Admit¬ 
ted and marked Exhibit 133-h. 

Northern Assurance Company, London, England, May 3, 
1906. Admitted and marked Exhibit 133-i. 

Norwich Union Fire, Norwich, England, June 18, 1906. Ad¬ 
mitted and marked Exhibit 133-j. 

Hamburg-Bremen Fire, Hamburg, Germany, June 19, 1906. 
Admitted and marked Exhibit 133-k. 

Caledonian Insurance Company, Edinburgh, Scotland, June 
21, 1906. Admitted and marked Exhibit 133-1. 

North British and Mercantile, London, England, June 20, 
1906. Admitted and marked Exhibit 133-m. 

Aachen and Munich, Aix-la-Chapelle, Prussia, July 17, 1906. 
Admitted and marked Exhibit 133-n. 

Alliance Assurance London, England, June 20, 1906. Admit¬ 
ted and marked Exhibit 133-o. 

Atlas Assurance Company, London, England, June 19, 1906. 
Admitted and marked Exhibit 133-p. 

British American Assurance Company, Toronto, Canada, July 
3, 1906. Admitted and marked Exhibit 133-q. 

* 

By Mr. Hatch: 

Q. In my haste, I omitted one question,— in my examination 
of you. Three fire insurance companies were the only ones in 
this State as the result of the San Francisco fire that were im¬ 
paired ? A. In the result, yes. 

Q. That is, the North German, which went into the hands of a 
receiver ? A. Yes. 

Q. The Dutchess, which liquidated voluntarily? A. It is still 
in process. 

Q. Of liquidation? A. Yes. 

Q. And the New York Fire, which reinsured ? A. Yes. 

Q. And how as to all the other companies? A. I think the 
United States Fire ceased business for a time, but has recentlv 

' V 

proceeded again — determined to go on. 

Q. Now, are there any others ? A. None to my knowledge. 

Q. Well, you would know, would you not ? A. I would. 

Q. And as to all of the other companies, a list of which has 
been given here this morning, will you state whether or not they 
are solvent and doing business and complying with the laws of the 
State of New York ? A. They are. 



Testimony of Mr. Kelsey. 


407 


Q. I show you a paper (handing paper to witness) ; what is 
that? A. It is a list of the Hew York State Firo Insurance Com¬ 
panies and other State companies as to the amounts paid into 
surplus and to increase of capital. 

Q. Between what periods? A. (continuing) and also a schedule 
of remittances from the home offices of the foreign companies to 
United States branches. 

Q. And between what periods ? A. Between the time I took 
possession of the office and the present time. 

Mr. Hatch.— I offer that in evidence. 

(Submitted and marked Exhibit 134.) 

Mr. Mayer.— This is a list of the companies who have paid 
various sums into surplus as testified, and I will now read the 
same. 

Mr. Mayer then read Exhibit 134, which is as follows: 

PAID USTTO SURPLUS. 

i 

New York Slate Companies. 


Continental. $381,714 00 

Eagle. 150,000 00 

Hanover. 250,000 00 

Pelican. 350,000 00 

Rochester German. 600,000 00 

Other State Companies. 

Alliance. 733,786 08 

American Central. 949,670 00 

Calumet. 370,000 00 

Citizens’. 35,000 00 

Columbia. 50,000 00 

Concordia. 50,000 00 

Connecticut. 500,000 00 

Delaware. 118,850 00 

Dixie. 250,000 00 

Firemen’s Fund Insurance Corporation. 289,700 00 

Fire Association. 1,250,000 00 

Franklin. 300,000 00 

German, Peoria. 100,000 00 





















468 


Senate Judiciary Committee. 


Girard. $400,000 00 

Jefferson.... . . 75,000 00 

Hartford. 3,000,000 00 

Insurance Co., Pennsylvania. 200,000 00 

Michigan Commercial. 70,000 00 

Michigan Fire and Marine. 200,000 00 

Milwaukee Fire. 150,000 00 

Milwaukee Mechanics’. 300,000 00 

.New Jersey Fire. 50,000 00 

National. 300,000 00 

National Union. 1,050,000 00 

New Brunswick. 200,000 00 

Old Colony. 200,000 00 

Orient. 83,000 00 

Pennsylvania Fire. 1,050,000 00 

Star 100,000 00 

Security. 112,500 00 

Shawnee. 100,000 00 

Southern Fire. 77,258 05 

United Firemen’s. 100,000 00 

Total (38 companies). $14,546,478 13 


INCREASE IN CAPITAL. 

New York State Companies. 

Hanover. $500,000 00 

Niagara. 250,000 00 

Phenix. 500,000 00 

Rochester German. 300,000 00 

Other State Companies. 

American Central. $1,000,000 00 

Concordia. 100,000 00 

Connecticut. 500,000 00 

Fire Association. 250,000 00 

Franklin. 300,000 00 

Hartford. 750,000 00 

Girard. 200,000 00 

Michigan Commercial. 100,000 00 






































Testimony of Me. Kelsey. 469 

Milwaukee Mechanics’. $300,000 00 

National.,. .. . 111,013 34 

Northwestern National. 400,000 00 

Pennsylvania Fire. 350,000 00 

Security. 187,500 00 

Shawnee. 100,000 00 

Southern Fire. 91,544 15 

United Firemen’s. 100,000 00 


Total (20 companies). $6,390,057 49 


REMITTANCES FROM HOME OFFICE OF FOREIGN 
FIRE INSURANCE COMPANIES TO UNITED 

STATES BRANCHES. 

Aachen & Munich. $2,964,482 67 

Alliance. 1,376,255 44 

Atlas.<.. 1,464,923 92 

British America .’. 855,593 23 

Caledonian. 2,136,747 85 

Cologne Reinsurance. 1,168 25 

Commercial Union. 2,298,437 79 

Hamburg-Bremen. 2,932,700 73 

Insurance Company, Salamandra. 200,000 00 

Law Union.. 1,458,540 00 

Liverpool, London and Globe. 3,773,617 53 

London Assurance. 4,689,201 56 

London and Lancashire. 4,787,173 91 

Moscow. 100,000 00 

Munich Reinsurance. 945,125 00 

North British. 2,257,494 98 

Northern. 3,539,798 46 

Norwich. 1,201,573 00 

Palatine. 1,770,074 76 

Phenix. 2,392,532 50 

Prussian. 602,200 00 

Rossia. 1,008,024 99 

Royal. 4,180,544 08 

Royal Exchange. 3,187,512 91 

Skandia. 550,100 00 








































470 


Senate Judiciary Committee. 


S im . $2,104,801 00 

Svea. 1,285,000 00 

Union Assurance. 2,668,560 12 

Western. 1,291,859 49 


Total (29 companies) . $68,222,045 82 


Q. Mr. Kelsey, you were examined by Governor Hughes ? A. 
1 was. 

Q. Do you recollect the date ? A. Except that it was Monday, 
I have forgotten the date. 

Q. There have been some statements with respect to your testi¬ 
mony in reference to the Armstrong report. I believe you testi¬ 
fied before the Governor that you remembered reading a synopsis 
of it in the papers ? A. I did. 

Q. And also the pamphlet when it was issued ? A. I did. 

Q. That is, the Armstrong report, or the pamphlet of it first 
published in the newspapers, before- the issue of the pamphlet ? 
A. Well, I saw it there first. 

Q. And you read it when it appeared then in the newspapers ? 
A. I did. 

Q. I show you a book; what is it (handing book to witness) ? 
A. That is the pamphlet edition of the text of the report. 

Q. And that is to what you referred in your testimony? A. 
Yes, sir. 

Q. Examine that pamphlet, please. Is that the pamphlet that 
you read ? A. It is. 

Q. Did you read the whole of it ? A. I did. 

Q. Where ? A. I was then Comptroller. The printing passed 
through my hands or the bills, and a copy was sent to me at the 
time the report was printed. 

Q. And when you answered the Governor, did you refer to this 
present pamphlet as the pamphlet that you read ? A. I did. 

Q. And in a subsequent statement in answer to queries by 
the Governor, I find: “ I don’t know that I ever read it from 

beginning to end at one time; no.” Will you state what you did 
do with respect to the Armstrong report in the course of the ad¬ 
ministration of the affairs of your Department ? A. I have had 
this pamphlet continuously. It has been on my revolving book¬ 
stand or in a drawer of my desk. I also have the printed report 









Testimony of Mr. Kelsey. 


471 


in several volumes. When matters came up that were of interest, 
01 where information was wanted, I recalled and referred to this 
edition for information, and at such time would read over in rela¬ 
tion to a particular company or upon a particular topic. 

Q. And you availed yourself, with respect to the particular 
subject which you then had under consideration of all informa¬ 
tion contained in the Armstrong report, to enable you to dispose 
of the matter then in hand ? A. I did, from time to time. 

Q. And in that manner, state whether or not the Armstrong 
report was a source of study with you or examination as the busi¬ 
ness of the office progressed ? A. It was not a protracted study, 
but it was a very useful reference book. 

Q. And as you had occasion in the discharge of your duties to 
dispose of any matters referred to hi the Armstrong report, did 
you examine it ? A. I did very frequently. 

nQ. And in the matters to which I have directed your attention 
in the course of this whole examination, Mr. Kelsey, have-there 
been any matters connected with the routine business of your De¬ 
partment? A. There have not. The matters here presented are 
all extraordinary, unusual. 

Q. That is, in the first development of your statement of the 
business of the Department, it related to provisions and questions 
which arose under the new law. A. Under the new statutes. 

Q. And then, in connection with that, the fire situation ? A. 
Precisely so. 

Q. Kow, has there been produced here in connection with your 
examination anything that sets forth the routine business of the 
office ? A. There has not, unless you refer to the totals of the cor¬ 
respondence. 

Q. There is some of the correspondence in there that relates 
to routine business ? A. The total number of letters, yes. 

Q. And that related to the sixteen thousand letters of which 
you have testified ? A. Yes, sir. 

Q. Can you state to the Committee generally about what vol¬ 
ume of the routine business is; I do not ask for details ? A. I do 
not know exactly what would be included. It is the every day 
business of the office which requires continuous attention from the 
normal force. Under the new statutes a considerable force is re¬ 
quired, and likely more will be required; two new stenographers 
and a clerk, and a rearrangement of the clerical force are the 
only changes that have been made. 


472 


Senate Judiciary Committee. 


Q. Are you able to state whether the routine business of the 
office has been disposed of as it arose? A. That is kept up 
promptly and continuously. That is the only way we can do it. 

Q. And that is in addition to the extraordinary matters to 
which your attention has been directed. A. It is. An examina¬ 
tion or so was spoken of; that was not extraordinary. 

By Senator Armstrong: 

Q. Except as regards the limitation of salaries which you have 
spoken of a§ embarrassing in certain instances; has there been any 
lack of funds in your office — the appropriation by the legislature ? 
A. That there has been none; it has been ample. It is liable to be 
short in the future. 

Q. Unless it is increased ? A. Unless it is increased. 

By Mr. Hatch: 

Q. So far as the election correspondence was concerned, state 
whether or not you looked after that personally? A. I think I 
have stated, judge, that all of the correspondence — I think every 
letter was under my personal charge; that I dictated all the 
replies; all the letters came to my desk. 

Q. That covers the whole subject of the election? A. Section 
94 all the way through. 

Q. You stated in the opening of your examination, Mr. Kelsey, 
the conversation which you had with Governor Higgins which led 
up to your appointment? A. I did. 

Q. And in which he urged you to accept. Did you have any 
further conversation with Governor Higgins ? 

Mr. Hatch.— I desire to state in explanation to the Committee 
one thing. It has been called to my attention that in the opening 
address to the Committee I stated that with respect to the retention 
of Mr. Hunter and Mr. Vanderpoel, in the conversation with Gov¬ 
ernor Higgins, that it was also in the presence of the Attorney- 
General Mayer. I am mistaken in that regard and that was a 
mistaken statement. While it will appear that General Mayer 
was frequently present at other conversations, he was not there at 
this time. 

Q. Will you state the first conversation you had with Governor 
Higgins after you assumed the duties of your office? A. In re¬ 
lation to what? 




Testimony of Mr. Kelsey. 


473 


Q. In relation to the matters. A. I saw him nearly every day, 

Q. Well, where ? A. At the Capitol, or, after the family went 
to Olean, at such times as he was in the city he frequently break¬ 
fasted and took his lunch at our house. 

Q. Where was that? A. Ninety-seven Columbia street. 

Q. And what time did his family return to Olean ? A. I think 
soon after the adjournment of the Legislature. 

Q. And that was what date? A. That was the 3d of May, I 
think. 

Q. And what did you talk with him about ? A. Well, I don’t 
remember the first conversation, just what was said. You mean in 
relation to the fire ? 

Q. Well, what I wanted to know is whether the subject matter 
of your conversation with him was the business of your Depart¬ 
ment? A. It was, frequently. 

Q. Now, do you recollect, in June, having a talk with him at 
his private office in the executive chamber ? A. Well, as I recol¬ 
lect it now, the first conversation in which the fire situation was 
talked over was coming up through the park one morning prior to 
"he time I took up the copy of that slip in the report. 

Q. Well now, what was the conversation you had with him 
coming through the park ? A. We spoke of the San Francisco 
conflagration — the circular that was out, and the estimates that 
were coming in, the immense losses and the possible effect upon 
the insurance interests of the country. I said to him that the 
situation was such that there might be serious trouble before we 
got through; that in keeping track of what should be done I would 
not be able to spare from the service Mr. Vanderpoel and Mr. 
Hunter until probably the end of the year. 

Q. What reply did he make to that, if any ? A. He said that 
it was necessary for us to be very cautious and he would trust my 
judgment to take the safe course and to do what ought to be 
done; that if I needed the men he saw no objection to retaining 
them. 

Q. And that conversation you say was when? A. It was one 
morning we walked up from breakfast and it w^as the last day of 
May or early in June or somewhere about there. 

Q. Have you stated all that conversation that you recollect? 
A. I have stated all I recollect in relation to that particular sub¬ 
ject. We talked at considerable length of the companies and 
losses and the calamity. 



474 


Senate Judiciary Committee. * 


Q. That was a general conversation on that subject? A. It 
was. 

Q. Now, do you recollect meeting him in his private office after 
that, in June? A. Well, my present recollection would be that 
it was later; it was at the time of the publication of the volume, 
the fraternal report in which I think I testified the other day I 
thought I ought to insert some comments upon the fraternal en¬ 
dowment scheme that was being worked in various parts of the 
state or by a few companies. I drafted the copy, and inasmuch as 
the tabulations had been under my predecessor, although this was 
issued under my name, I took the copy in to the Governor and 
asked him whether there was any objection to including that 
with the report that had been made up and was in the hands of 
the printer. 

Q. What was the conversation ? A. I explained it about as 1 
have here, except that I talked with him about the plan and the 
complaints we were getting and the defrauding of the poorer class 
of people under that scheme, or their complaints that they were 
defrauded. He took the copy when I handed it to him and read 
it through #nd said it was all right. He said if those were the 
facts, put them in. 

Q. Was anything further said at that conversation? A. The 
conversation drifted after that into the situation in the Depart¬ 
ment and the developments of the San Francisco fire situation. 

Q. State to the Committee as nearly as you recollect what the 
conversation was. A. At that time I told the Governor of how we 
were, -or how I was — the Department — getting information of 
the developments from day to day through the New York office,— 
Mr. Hunter and Mr. Vanderpoel. 

Q. Was that your language as nearly as you are able to recall ? 
A. I do not think, Judge, that I could fix the exact sentences 
either way. 

Q. Well, state the substance of it then. A. That we were hav¬ 
ing a great many inquiries and a great many personal applica¬ 
tions, that I was beginning to receive letters from insurance men 
and from some insurance publications wanting detailed informa¬ 
tion and presenting detailed statements of the impending crisis, 
as they called it, or, as it has been called by some; that through 
Mr. Vanderpoel and Mr. Hunter I was enabled to keep in close 
touch with the situation in New York city, and that they were 
better informed than any other part of the country as to the situa-^ 




Testimony of Me. Kelsey. 


475 


tion in San Francisco; that their services were invaluable, I 
thought, and that the men were indispensable at that time. 

Q. What reply did he make to it, if any ? A. The only words 
I remember was his saying, “All right.” 

Q. When did you next have — have you stated all that .con- 

XJ tf 

versation that you recollect ? A. All that I remember, ves. 1 
simply have the recollection of a talk with him of that substance. 

Q. It lasted about how long? A. I should think I was up 
there that day half an hour or such a matter. 

Q. Do you recollect when you next met him ? A. I do not 
I was meeting him nearly every day when he was in town. 

Q. Did you have any conversation with him with respect to the 
letter that was received from Mr. Moore ? A. Well, prior to that, 
I remember a very brief conversation at the time the July circular 
was out. I don’t remember whether it was before or afterward— 
the circular that showed the condition as of June 30th, which was 
issued July 8th. I have forgotten the date of the Moore letters. 

Q. Are you able to state what the conversation was that you — 
A. Kot in detail, beyond a brief summarizing of the increase in 
the losses over the first estimate and the claims for salvage that 
in some instances looked preposterous, and the fact that it was 
getting more critical and that we were going as carefully as we 
could without doing or saying anything to promote the un- 
eertaintv. 

Q. Did he make any reply to your statements, that you recol¬ 
lect ? A. I don’t remember anything especially said, beyond his 
nodding his head and some exclamation in regard to it; nothing 
direct. lie certainly did not dissent from it. 

Q. Did you talk with him about the receipt of the letter from 
the Merchants’ Association ? A. I did. 

Q. Where was that conversation ? A. I don’t remember. My 
impression is that that was at the house, and my only reason for 
recollecting it is that we had both known Mr. Mead, who is the 
secretary, and who had been up here nearly every session of the 
Legislature as a representative of the Merchants’ or some other 
association, in -regard to bills. 

Q. Will you state that conversation? A. The Mead letter, as 
I recall, was after the other letter. I remember the way I started 
the conversation more than anything else. I said that in the fire 
situation Christie Mead was “butting in ” with his organization. 
He laughed a little and that led to some talk as to the complaint 



476 


Senate Judiciary Committee. 


that was made —the similarity with the former complaints and 
the desire to have an understanding that would not lead to am 
publication that might be detrimental to public interests. 

Q. Was there anything said during these subsequent conversa¬ 
tions with respect to either Hunter or Vanderpoel, or both? A. 
There was at the time I was in his private office with the copy of 
the text of the report. At that time, in the general discussion of 
the situation I told him of my view of remodeling the examina¬ 
tion bureau in blew York city, dispensing with the first deputy, 
providing an examiner-in-chief, with assistants who would take 
care of the leading lines of examination, and the specialists in 
that line, the increased examining force, etc. 

Q. And what reply did he make to that ? A. I don’t remember 
the words. He commended the plan or spoke of it as seeing no 
objection to it. 

Q. During the-? A. It was more as a matter of informa¬ 

tion to him. lie had not requested — had made no suggestions; 
ottered no advice. 

(). Had you ever received from any source any statement •— 
had you ever received from any source any request either to 
remove or to continue Messrs. Hunter and Vanderpoel in their 
positions ? A. Aside from the suggestion of Senator Armstrong, 
I do not recollect — and the comments in the newspapers the 
latter part of the year — I do not recollect ever having had a 
suggestion of that kind. 

Q. How, do you recollect any specific instance which you sep¬ 
arate in your mind, where you had a conversation with Governor 
Higgins on the things you have stated ? A. I do not, at this 
moment, but I know it was mentioned repeatedly as incidents 
developed from time to time. 

Q. Did you — after his family had gone — you met the Gov- 
• ernor how frequently at the house ? A. Whenever he was in town 
I saw him every day, and generally two or three times. 

Q. And that was what proportion of the time? A. Well. F 
could not estimate whether it would be a quarter or half of the 
time. He had been — perhaps to account for my, seeing him — 
I was not especially an intimate friend of the Governor’s, although 
I had known him a great; many years, but the men with whom I 
was living were a continuation of the old household that he had 
lived with when he was a Senator, so that when the family were 
away he made that a sort of ex-officio residence. 








4Y7 


Testimony of Me. Kelsey. 

Q. Are you able to state whether generally in your conversa¬ 
tions that you had with the Governor covering that period of time, 
he was informed by you concerning the insurance situation ? A. 
He was. 

Q. And the details of the matter were discussed at these times 
of which you have spoken ? A. They were. At the time of the 
Moore letters, there were conversations then in relation to the 
author of the letter. At first the name was withheld — his name 
was not given to me. It was discussed as to the standing of the 
man, his relation to the wealthy men of Hew York, and the 
necessity of investigating very carefully any suggestions made by 
him as to the situation. 

Q. And upon these subjects you advised with the Governor? 
A. I did. 

Q. How are you able to state whether or not these communica¬ 
tions were continuous from the period you have mentioned down 
to the time when he retired from office ? A. They were. During 
the latter part there was not so much excitement; that is true — 
the fall months, the later fall. 

Q. But during the time of this critical period? A. During 
the most critical period, when it was uppermost in my mind, it 
was a matter of frequent reference. I do not want to convey the 
inference that I ran to him with every little complaint that was 
made or everything of that kind, but in going back and forth it 
was mentioned. 

Q. Going back and forth; what do you mean ? A. Well, some¬ 
times the Governor and three or four others would be together and 
sometimes the Governor and myself alone. 

Q. And then there was likely to be such conversation? A. 
There was. 

Q. Are you able to state how many, times you saw him in the 
Executive Chamber when these matters were the subject of dis¬ 
cussion ? A. I could not say the number. 

O. What would you be able to sav was the number of times, 
according to your best recollection ? A. Well, not very many in 
the Executive Chamber. I was not up there very frequently. 

Q. There were mostly at the house and walking from the house 
to the Capitol? A. We frequently dined together at the Fort 
Orange Club or the Ten Eyck, in addition to his taking lunch with 
us at the house. 

Q. And did you breakfast together any? A. Usually, when he 
was in the city, during the summer months. 


478 


Senate Judiciary Committee. 


Q. And at those times when you met, were the insurance mat¬ 
ters the subjects of discussion? A. They would not be distinct¬ 
ively the sole subject, but they were mentioned at times. 

Q. Are you able to state whether or not, from your conversa¬ 
tions with Governor Higgins, whether he was fairly well informed 
by you concerning the insurance situation ? A. lie was. He 
knew the general aspect and the changes as they developed. 

Q. And does that apply to those changes of which you have 
given testimony here ? A. It does. 

Q. Is there anything further in any conversation which you 
recollect to which I have not directed your attention ? A. At the 
present moment nothing further occurs to me. 

Q. I have omitted one thing. You had an interview, did you, 
with Governor Hughes and Senator Armstrong in Yew York ? 
A. That was back in June. 

Q. Yes. What time was that? A. The 15th, as I recollect it. 

Q. The 15th of June. Where was that? A. At the Bar Asso¬ 
ciation building in Yew York. 

Q. And what was the subject matter of discussion there? A. 
It was an interview, at my solicitation, for the purpose of going 
over various provisions of the Armstrong Law, as it was called-, 
that I might better understand the purpose of the committee and 
the reasons that actuated them, and their construction of the vari¬ 
ous parts and sections, to give me better information than I then 
possessed. 

Q. And how long did that interview last? A. It was during 
the evening, from, I should say, eight or eight-thirty until about 
midnight or a little after. 

Q. And state what range the discussion took ? A. I had from 
correspondence and my own reading, questions that had been 
sent to the Department and matters brought up in the Department, 
a memorandum of a number of things I wished to talk to Senator 
Armstrong about, and in addition to that I think we discussed 
pretty much of everything in connection with the law. 

Q. Let me ask you if I understood you correctly. That meet¬ 
ing was at your solicitation ? A. It was. 

Q. Yow, at that meeting was there anything said about Mr. 
Hunter and Mr. Yanderpoel? A. Well, I have not a personal 
recollection of it. I remember distinctly that Mr. Armstrong 
once spoke to me very positively about it. I did not recall that 
it was at that meeting, although, as he remembers it that way, 


Testimony of Mr. Kelsey. 


479 


I have no reason to dispute it and do not. There was — after we 
had gone through with'a copy of the Insurance Law and talked 
over the various matters, there was a laying aside of that and a 
little general conversation, or considerable. My mind was more 
intent upon the points in the law that had been discussed where 
I wanted advice and information, and I did not charge my mind 
and I do not remember a conversation nor the details of it of that 
character. 

Q. You have some recollection, have you? A. I remember 
that Mr. Armstrong on one occasion — if that was the occasion — 
said to me that if he were in my place he would get rid of Hunter 
and Yanderpoel and he advised me to do so. 

Q. Do you recollect whether you made any reply to it? A. 
Well, he stated a little more than that; that the revelation of the 
Committee’s report and the testimony that was taken there showed 
that they were not reliable. He put them both together. One of 
his expressions was that he thought that Hunter, I think it was, 
“ deceived the old man,” meaning Mr. Hendricks, and he thought 
it would be for my interest to have them out of the Department. 
I remember stating to him that he need not fear but that I would 
“ make good; ” that was the expression. 

Q. Did Governor Hughes make any suggestion concerning their 
dismissal or retention ? A. I do not recollect that he did; I would 
not say he did not. 

Q. But you do not recall that he did? A. I do not. My 
original impression was that Mr. Armstrong’s conversation with 
me was at another place, but I may be mistaken. 

Q. You have stated the purpose that you had in view ? A. I 

have. 

Q. Did you make any memoranda at that meeting of what the 
suggestions were of Mr. Armstrong? A. Well, I took down a 
typewritten copy of various suggestions or various memoranda 
for inquiry, and either at the meeting or immediately afterward, 
I jotted down pencil memoranda of the conclusions reached or an 
indication of their views — something of that kind. 

Q. I show you a paper (handing paper to witness). A. This 
is the paper. 

Q. Do I understand you that that whole paper is a memoran¬ 
dum that you took down for your information as to the result of 
that conversation? A. This is the preparation that I had as a 
starter for topics to inquire about. 


480 


Senate Judiciary Committee. 


Q. Oh, that is, the typewritten part of that? A. Yes, sir. 

Q. That you took with you, when you went to that conference ? 
A. That is the original paper that L had. 

Q. Well, you prepared that here? A. Y r es, and I took it with 
me. 

j 

Q. And then the conference was for the purpose of your get¬ 
ting advice with respect to the matters that you had prepared a 
memorandum of here? A. I wanted particularly to remember 
these points, and then such other general inquiry as might arise 
when we were together. 

Q. Did you read that paper there, or call attention to it as you 
went through in the discussion ? A. I did. 

Q. And what did you do with respect to the advice which you 
received ? A. We had the copies of the law and would read a 
section and talk it over, and they would explain the various posi¬ 
tions taken by the different members of the Committee, and what 
they were trying to reach — what their conclusion of the inter¬ 
pretation of the law was. 

Q. And did you at the time jot down their views in pencil 
opposite the particular subjects ? A. I made a few of those there, 
and the rest I made after I reached my room in the evening. 

Q. And are those the ones that are upon the paper now ? A. 
They are; with the exception of the one on the first page here in 
regard to the non-participating business. After I reached Albany, 
in going over the matter with Mr. Paterson, my chief actuary, I 
explained a little in detail where there was no memorandum, and 
he jotted it down in his handwriting. I think it is his hand¬ 
writing in two places. The rest of it is all mine. 

Mr. Hatch.— I desire to offer that in evidence. 

The Witness.— Do you care to see it, Senator Armstrong ? 

Q. Do you recollect now, Mr. Kelsey, is there any memoranda 
there with respect to Hunter and Vanderpoel, appearing upon the 
paper? A. Ho, that was merely incidental to the general talk, if 
there was anything said there. 

(Paper admitted and marked Exhibit Ho. 135.) 

Mr. Mayer.— At the top of this paper, Exhibit Ho. 135, there 
is a memorandum by Mr. Ainsworth, which is no part of the 
paper, and which I will read just so as to identify it (reading) : 
“ This used in Hew York at conference with Governor Hughes 
and Mr. Armstrong June 15th, 1906.” How I will read the first 
typewritten part of the memorandum. 


Testimony of Me. Kelsey. 


481 


(Reading) : “ Memorandum regarding tlie new laws as passed. 
Kon-participating business. It seems to have been the intention 
in the new sections of the law that foreign corporations could con¬ 
tract either participating or non-participating business in Kew 
York State so long as the accounts relating to such separate 
classes of business are kept distinct. It would appear, however, 
as if the provisions of the old law, as contained in section 25, had 
not been kept in mind, because there the statement is distinctly 
made: ' a foreign insurance corporation may transact in this State 
only such kind of business as under the law of the State a like 
domestic corporation is authorized to transact.’ The above would 
seem to limit all foreign corporations to the same kind of business 
which can be transacted by domestic corporations, and presumably 
therefore a mutual corporation of another State would not be 
justified in writing non-participating business. This might 
possibly have been the conditions even under section 33 regarding 
' reciprocal requirements/ but it seems to be clearly the case when 
the old section 25 is read as part of the old law.” 

Q. Kow, on the side, Mr. Kelsey, there is some pencil memo¬ 
randa. Do you recall whose handwriting that is ? A. I think it 
is Mr. Paterson’s, but I am not sure. 

Q. If it is Mr. Paterson’s, was it made as you have testified 
after your return to Albany ? A. After I returned to Albany. 

Mr. Mayer.— That memorandum says “In re Travelers In¬ 
surance Company A.-G. Op. (Meaning Attorney-General’s 
opinion) 6/20/06. ‘ Life Insurance corporations of other states, 

etc., cannot be permitted to issue both kind of policies in New 
York State after January 1st, 1907.’ 'Debarred by limitations 
etc., secs. 25 and 29.’ ” 

This is a matter in which the Attorney-General reversed his 
own opinion. 

(Reading) : “ Examinations. Another part of section 25 says 
that foreign corporations shall be subject to the same examina¬ 
tions as domestic corporations.” 

u Misrepresentation. The heading of section 60 reads: c Esti¬ 
mates and misrepresentations prohibited,’ and several people 
seemed to think that this would prohibit all estimates whatever, 
whether they in any sense misrepresent the policy or not. Our 
practice in the past has been to prohibit all estimates so that the 
question does not trouble us in any way.” 

31 



482 


Senate Judiciary Committee. 


Q. Now, there is a memorandum in pencil. In what hand¬ 
writing is that? A. That is mine. 

Q. Read the memorandum, please (handing paper to witness) 
A. (reading) : “ only false estimates prohibited.” 

Q. Was that memorandum made as a result of the conversation 
referred to? A. It was, as indicating the opinion. I do not 
think there was any difference in opinion on it. 

Mr. Mayer.— (reading typewritten portion of memorandum) : 
“ Kinds of business. The last sentence of section 70, printed on 
page 29, would seem to prohibit a life insurance company from 
incorporating any kind of accident provision in a life policy. 
In the past I understand that several companies have issued sub¬ 
standard policies to cover special hazards, with the statement that 
the claim will be paid in full if the insured were to die as the 
result of an accident.” 

Q. Now, opposite that, there is a pencil memorandum. Do 
you know in whose handwriting that is ? A. That is mine. 

Q. What are the words ? A. “ Statute is clear.” 

Q. Was that likewise put down by you as the result of that 
conference? A. Yes, it was done after we had talked the matter 
over. 

Mr. Mayer.— (Reading typewritten portion of memorandum) : 
“ Distribution of surplus. It would appear as if dividend addi¬ 
tions to a jiolicy must in future participate in the surplus. There 
has been a great deal of thought as to whether or not com¬ 
panies will pay a dividend at the end of the first policy year. 
Even some companies which are likely to set up the full reserves 
and will not take advantage of the select and ultimate method, 
seem to favor the idea of declaring a dividend at the end of the 
first year.” 

Q. Now opposite the heading “ distribution and surplus” in 
the typewritten memorandum there is a pencil memorandum? 
A. There is. 

Q. And in whose handwriting is that? A. It is in mine. 

Q. And put there as a result of what? A. Of this talk, dis¬ 
cussion. 

Q. With the Senator and Gov. Hughes? A. Yes. 

Q. Read the memorandum, please. A. It reads: “ They do in 
policy where premiums annually paid. Do not for paid up or 
surrendered. Unless earned should not be declared.” It is mere 
catch lines to keep in my recollection that’s all. 



Testimony of Mr. Kelsey. 


483 


Mr. Mayer.— (Reading next paragraph of typewritten memo¬ 
randum) : “ Surrender values. The wording of the third para¬ 
graph at the top of page 40 raised the question as to whether 
companies would be at liberty to pay a larger value than that 
specified in the law. According to the strictest reading of the 
section, there might perhaps be a little doubt, but the general 
opinion was that companies would be perfectly safe in allowing 
larger surrender values than the minimum values furnished by 
the law. In other words, it was thought that the law was in¬ 
tended only to specify minimum values, and did not specify the 
exact valued 7 

Q. Now, opposite the heading “ surrender values 77 is there a 
pencil memorandum, and if so, in whose handwriting? A. There 
is, in my writing. 

Q. Read it? A. It reads: “ No prohibition against payment 
of more than minimum. 77 

Q. That was your brief memorandum as the result of this con¬ 
ference? A. It was. 

Mr. Mayer (reading next paragraph of typewritten memoran¬ 
dum) : “ Limitation of new business. The question was raised 

as to whether the 150,000,000 would be computed on an issued or 
on a paid-for basis. The general feeling was that a policy is not 
technically 1 issued, 7 so far as the law is concerned, until the 
premium thereon has actually been paid and the contract de¬ 
livered. In this respect, therefore, it was generally thought 
that the use of the word ‘ issued 7 is different in the law from 
that which actuaries generally give to it for internal insurance 
purposes. 77 

Q. Now, opposite this heading “ limitation of new business 77 is 
there a pencil memorandum, and, if so, in whose handwriting? 
A. There is, in my writing. It reads: “Believe can be no 
trouble. Policv must be ‘ in force, 7 and is not in force until 

«y ' 

paid for. To carry more than permitted under pretenses that 
excess is not paid would be fraud. 77 

Mr. Mayer (reading next typewritten paragraph of memoran¬ 
dum): “Limitation of expenses. The use of the words ‘ expend 
or become liable for 7 on the third line of this paragraph raised’ a 
question as to whether a company would, in the year 1907, have 
to take into consideration not only the expenses applicable to the 
business of that year under the new law, but also the expenses 
applicable to all outstanding and deferred premiums paid within 


484 


Senate Judiciary CommiDteD. 


the calendar year, although relating to business issued in the 
preceding year. This means, of course, that there will be a pos¬ 
sibility that companies should be held liable for more than one 
year's expenses. 7 ’ 

Q. Wiil you see if there is a memorandum in pencil there? 

A. There is, in my writing-no, it is not; I think that it is 

Mr. Paterson’s. 

Q. Now the memorandum in Mr. Paterson’s handwriting reads 
— I will read it. 

Mr. Mayer (reading): “ In re Manhattan Life, A. Gr. Op., 
6/20/06 ‘ policies actually issued in 1906, not paid for, however, 
until after January 1st, 1907, should not be included in computa¬ 
tions provided for in section 99.’ ‘ Premiums should be elimi¬ 

nated.’ ” 

(Reading next typewritten paragraph of memorandum under 
same heading): “Another interesting question was raised as to 
whether or not a company must control its general agents, and 
prevent them from making any advances or allowances to sub¬ 
agents. For example, if a company were to make a contract with 
a general agent in some western State, such contract to be well 
within the new law so far as limitation of expenses is concerned, 
and this general agent felt that it would be to his interest to pay 
larger first year commissions to his sub-agents without paying 
him his renewals. In other words, the general agent would ad¬ 
vance out of his own pocket various sums in cash so as to enable 
the sub-agent to make a good living, relying on the business he 
might write to refund him the amount he might advance out of 
subsequent renewal commissions. The question is, whether this 
would constitute a breach of the Insurance Law; if so, what steps 
would a company be expected to take to prevent the general agent 
from making such advances. Further a doubt was expressed 
whether the New York Legislature has power to control payments 
made by the citizen of another State to his employees.” 

Q. Now, in the second paragraph of the heading “ Limitation 
of Expenses ” state whether or not there are two notations in pen¬ 
cil? A. There are. 

Q. And in whose handwriting? A. Mine. 

Q. AVill you read them? A. The first is “ Department has 
nothing to do with this.” The second reads “ absurd.” 

Q. And were those made as a result of this conference? A. 
They were. 



Testimony of Mk. Kelsey. 


485 


Mr. Mayer.— (Heading next 
randnrn): “Salaries of Officers 


typewritten paragraph of memo 
and Agents. Some doubt has 


been expressed a,s to whether the salary of every officer, irrespec¬ 
tive ot rne amount must be approved by the board of directors.” 

0- Aow, is there a pencil memorandum opposite that- para- 
graph? A. Yes. It is my writing, and it reads: “No question 
at all here.” 

Mr. Mayer.— (Reading next typewritten paragraph of memo¬ 
randum): “Investments. In section 100 appears the following 
direct and emphatic statement: ‘ No investment or loan shall be 
made by anv sncli life insurance corporation unless the same shall 
first have been authorized by the board of directors or by a com. 
mittee thereof, charged with the duty of supervising such invest¬ 
ment or loan.’ It is to be presumed that this clause cannot affect 
outstanding contracts and that therefore policies in existence 
which promise to give loans that have already been passed upon by 
the board of directors, and the loans may be granted without ref¬ 
erence to the directors or committee thereof. But in the case of 
outstanding policy contracts which do not directly promise that 
loans will be made, and on which, nevertheless, it has been the 
custom for many companies to grant loans, it would seem as if 
delay would have to take place until the granting of the loan could 
be approved by a committee of directors.” 

Without doubt this was not the intention of the Legislature, but 
it would seem to be the effect of the law. 

Q. Now, opposite the heading “ Investments ” did you make a 
pencil memorandum? A. I did. 

Q. Jn whose handwriting? A. Mine. 

Q. Will you read it? A. It reads: “Must have action ’>y 


directors.” 

Q. Was that likewise the result of the conference referred to 5 
A. It was. 

Mr. Mayer.— (Reading next typewritten paragraph of memo¬ 
randum: “Standard Policy Forms. A great many questions 
arose in regard to the standard policy forms, but I can scarcely 
refer to them without going into much elaborate detail.” 

Q. Ts there a memorandum opposite that, or rather at tlie end 
of that paragraph? A. There is. 

Q. In whose handwriting? A. Mr. Paterson’s. 

Q. And was that at your direction or not? A. I do not recall. 

Mr. Mayer.— (Reading pencil memorandum referred to): “In 


486 


Senate Judiciary Committee. 


re Travellers Insurance Company, A. G. Op. 6/20/06. See A. G. 
Op., 6/20/06 in re National Life. Corporations of other States 
and countries will be required on and after January 1, 1907, to 
issue in New York State standard forms of policies described by 
section 101 of chapter 326 of the Laws of 1906. 

The Witness.— I think all of those references are in Mr. Pat¬ 
erson’s hand, and were put on by him subsequently when your 
opinion or a case had been brought to his attention covering that 
matter. There are three of them, I think. 

Q. A ruling made by the Deputy Attorney-General in that re-' 
gard, and signed by the then Attorney-General, was afterwards 
changed by the Attorney-General ? A. It was. 

Q. On the last page of this memorandum is a reference to the 
Manhattan Life, Attorney-General’s opinion 6/20/06. In whose 
handwriting is that? A. In relation to the Manhattan Life, I 
think it is Paterson’s. I would not be sure. 

Mr. Mayer.—(Reading pencil memorandum referred to) : “In 
re Manhattan Life, A. G. Op. 6/20/06. Domestic stock life in¬ 
surance corporation can do a participating or non-participating 
business up to January 1, 1907, thereafter can only do one form. 
A domestic stock life insurance corporation electing to do a non¬ 
participating business can subsequently change to participating 
- business, but at any particular time must do one or the other.” 

By Mr. Hatch: 

Q. Mr. Kelsey, did you have during this period conferences 
with Attorney-General Mayer? A. I did. 

Q. How frequently? A. Well, when he was in town, it was 
daily on the average, or nearly that, and was frequently more than 
once a day. 

Q. Did you live in the same house with him ? A. I did. 

Q. On which were the subjects under discussion? A. Every 
conceivable question that was being raised upon the new statutes; 
that is, they were coming continually to the office. I would have 
them in mind or have a letter in my pocket and would talk with 
him about it. 

Q. And you did, on several occasions dine together where this 
was the subject of discussion? A. I have no doubt of it. Yes. 

Q. And covering what period did this frequency of consultation 
continue ? A. During his entire term, from the time I came in. 


V 


Testimony of Mr. Kelsey. 


487 


Q. And continued down to his-. A. Until he left Albany. 

I have imposed upon him considerably since too. 

Q. How, did you also consult with him in respect to the legal 
situation in the fire companies ? A. I did. 

Q. And the discussions that you had covering the period that 
you named ran the whole gamut of the insurance situation? A. 
They did. 

Q. And the legal questions as they arose ? A. They did. The 
Dutchess Life particularly, I remember. 

Q. Mr. Kelsey, when did you have your first communication 
with Gov. Hughes after his accession to office? A. The second of 
January. 

Q. What was the subject matter of the communication at that 
time ? A. I sent him a short note. 

Q. I call your attention to a letter (handing paper to witness), 
is that the letter which you sent to Gov. Hughes ? A. It is a copy 
of it. 

Q. In the copy book? A. In the letter book, page 662 — Let¬ 
ter Book Ho. 223, headed “ From December 10, 1906 to January 
14,* 1907.” 

Q. Bead it please? A. (Beading) “ January 2, 1907. Hon. 
Charles E. Hughes, Governor, Executive Chamber. 

Dear Sir.—At your pleasure and convenience I shall be ready 
to advise with you in relation to the affairs of the Insurance De¬ 
partment. Very respectfully yours, Otto Kelsey, Superintendent. 

Q. What did you receive in reply to that letter? A. An ac¬ 
knowledgment. 

Q. Have you that here ? A. I have. 

Q. Will you read it ? A. It is “ Executive Chamber- 

Q. Bead the whole of it ? A. (reading) “ State of Hew York, 
Executive Chamber, Albany, January 3rd, 1907. Hon. Otto 
Kelsey, Superintendent of Insurance, Albany, H. Y. My Dear 
Sir.— I beg to acknowledge receipt of your letter of the 2nd inst. 
I shall be glad to have an interview with you at the earliest 
opportunity, and hope to be able to make an appointment with you 
within a few days. Very truly yours, Charles E. Hughes.” 

Mr. Hatch.— I offer that in evidence. 

(Admitted and marked Exhibit Ho. 136.) 

Q. Did you have any further written communication with the 
Governor ? A. I did not. 

Q. When did you — did you see him after that ? A. I did. 






• 488 


Senate Judiciary Committee. 


Q. When was that ? A. The first time that I remember was on 
the occasion of inquiring whether he cared to glance over the 
preliminary text of my report. 

Q. Where was that ? A. It was in the Executive Chamber. 

Q. And was that the report that you have — that has been 
received in evidence here ? A. It was — the pamphlet, yes. 

Q. What conversation did you have with him at that time ? A. 
When I had completed the preliminary text — that is, I had it in 
my desk a few days,— I went to the Executive Chamber and saw 
the Governor. I told him — I have already testified to this — 
that the practice in the Insurance Department was such that the 
report was printed usually along in the summer; that the financial 
statements were as of the 31st day of December and filed, the fire 
by the first of February, and the other reports by the first of 
March, and that put the report over so that it w T as late in the 
session or too late to have any action taken; that I thought it 
a proper course, in view of the insurance situation, to prepare a 
preliminary text and have it printed and submitted to the Legis¬ 
lature, and later incorporate it with the statistical tables when 
they were prepared with the annual report. I asked if he cared to 
glance through it prior to its being sent to the printer, and he said 
he would like to look at it. 

Q. What did you do then ? A. I sent the copy of the type¬ 
written report up to him. 

Q. What next occurred ? A. I think it was two or three days 
after that I called again at the Executive Chamber. When he was 
at liberty to speak to me I asked him if he had had time to give 
any attention to the preliminary text. He said, yes, he had read 
it. I asked him if he had found anything very heterodox in it. 
He said “ Ho, it is a good memorandum.” I said, “ Then, I will 
go ahead and have it printed and have it distributed to the Legis¬ 
lature.” He said, “ Yes,” or something of that kind. Then he 
said there was a matter that he wished to speak to me about, and 
wanted to know if I could call the next day — I think it was the 
next day. I asked if it would affect the matter of the report— if I 
should hold up the printing, and he said, “ Ho.” I said then I 
would go ahead with it. That was the end of it. I came down. 

Q. What was your next communication with him? A. Before 
the time on the date that was fixed for me to call at his request, I 
think Mr. Fuller, his Secretary, ’phoned down to me stating that 
the Governor’s time had been occupied by other engagements that 





Testimony of Mr. Kelsey. 


489 


would detain him, and asked if the appointment — if it would be 
agreeable to me to have it go over for either one or two days, I 
don’t remember which, or it may have been a few days more, 
dhere was no objection on my part and I said so, and it was fixed 
for a later date. On that day I think another message by ’phone 
from Mr. Fuller, suggested that the National Guard hearing or 
something of that kind was taking the Governor’s time, and asked 
if I could come in the evening. I do not remember the precise 
order — I think though, in the Executive Chamber. I had said if 
it would be more convenient I would be willing to call at any time 
or place that would he agreeable to him. It was finally fixed that 
I was to call at 5 :15 Thursday evening, January 31st. 

Q. Did you call at that time ? A. I did. 

Q. State what took place at that time ? A. There were several 
gentlemen with the Governor in the large chamber. They were 
closing up some signatures — papers. The Governor greeted me 
and suggested that we go into the rear room. It was after office 
hours. Mr. Huff cut was there, Mr. Fuller, and, I think Major 
Treadwell, and a messenger or so,— possibly a stenographer; I 
don’t remember. I went through into the rear room. I have for¬ 
gotten whether I preceded or whether I followed the Governor 
through to his private office, or what used to he. 

Q. Well, then what took place ? A. lie asked me to be seated, 
and took a seat himself, and I think his first remark was, “ Well, 
what have you got to say to me ? ” and I told him that all I might 
say would take a great deal of time, in relation to the Department; 
that the most pressing thing was the matter of the election of 
directors in the two New York companies, which was then — in 
which the canvass was then proceeding. He said there should be 
no trouble about that; that there was uncertainty in framing the 
statutes, as to what the conditions might he, and they put the 
entire supervision upon the Superintendent of Insurance, who 
had the authority to go ahead and complete the work. He 
thought there was no occasion for any misunderstanding or for 
any trouble over that. 

Q. Well, go on. A. He then said, “ There is a matter that I 
wish to talk to you about, to which I have given ” — I don’t pre¬ 
tend to exactly quote the words, but practically — “ to which I 
have given a great deal of attention and have reached a definite 
conclusion.” I said that I would be glad to hear it. He said that 
his plan was to speak directly and he did not feel like being mealy- 


490 


Senate Judiciary Committee. 


mouthed, as he said, about it. I told him I appreciated the direct 
way of dealing in business matters; and would be glad to have 
him speak frankly. He said that at the time I took charge of 
the Insurance Department, there was a great opportunity; that I 
had not been equal to it, and that, in his judgment, the public de¬ 
manded a different administration, and he thought I ought to re¬ 
sign. I said that I was very sorry to have him reach such a 
conclusion; that I was confident he was misinformed as to the 
situation. I asked him if he would not be willing to talk the 
matter over with men who had had long experience in Albany and 
who had known me for a great many years. He said there would 
be no object in that, as the situation was one that demanded a 
change, in his judgment, and he could see no other course except for 
me to retire. I said to him that it looked like a harsh judgment, as 
I had endeavored to serve faithfully, and I knew of no reason why 
the Department could not be conducted in full accord with his 
views, if the administration could be bettered. He said that — I 
don't know that he mentioned their names, but that employees of 
the Department for many years had been continued by me, and that 
public sentiment was against it. I said that the conditions were 
such that I felt justified in the way that I had managed the De¬ 
partment. I cannot remember just what followed. I asked him to 
remember that in that administration I had been under a different 
environment perhaps than with his administration, and he wanted 
— he asked how, and I said a different State administration. He 
said “ I feared so.” 

Q. Well, anything else? A. I told him that the effect upon me 
would be most serious; that I never could explain to my friends 
satisfactorily a resignation; that I wanted a chance to live. He 
said that a resignation tendered by me could be accepted, if we 
understood each other, so that I could retire gracefully at such 
time as would be satisfactory. 

Q. Well, anything else? A. We talked considerably, in which 
I made an effort to have him see the situation from a different 
standpoint and to give me an opportunity. I remember saying to 
him that nobody had any hold on the Department, and I believed 
I had as few affiliations with those who would interfere with the 
working of the Department as anybody that could be selected; 
that if there were employees that were objectionable I knew of no 
reason why they could not be dismissed, if cause were shown for 
it. He said that the matter was in such shape that he did not 


Testimony of Me. Kelsey. 491 

believe anything would be accepted except a radical change — a 
house-cleaning. I told him that it was a matter in which I could 
not — having had no indication that there was any criticism of the 
Department — be expected to make up my mind on a moment’s 
notice; that I thought it was not unreasonable to afford time 
and opportunity to reflect upon the matter, or to consult my 
friends. He said, “ Certainly,” that there was no objection, and 
asked how much time I needed. I told him that I was going to 
Hew York that night on a very important matter with the in¬ 
spectors, that would keep me busy for two or three days; that 
friends whom I should want to talk with — political friends — 
were not in the city and not in the State. I suggested a couple of 
weeks. He said, we would let it stand for a few days. Then he 
said, “ Let us understand each other. There is to be no indefinite 
postponement. I must have an answer, or I ought to have an 
answer within a few days.” I said if he felt that way he cer¬ 
tainly was entitled to it. That was the conclusion. 

Q. During the time you were there, were Hunter’s and Van- 
derpoel’s names mentioned ? A. I cannot recall that they were, 
and yet, there was a discussion,— a talk or at least a mention of 
the employees still retained in the Department. How, I may have 
mentioned their names and there may have been further talk in 
relation to them; I do not recall it now. 

Q. Did you have any conversation with him at that time in 
which Governor Higgins was referred to ? A. Aside from what 
I said — a different State administration — well, in that corn 
nection, T did make the statement that mv course was in accord 
with and that Governor Higgins had knowledge of the conditions. 

Q. Well, did you state what — that he had knowledge of the 
conditions — what he did ? A. I don’t know whether I used the 
word “ approved ” or not. 

Q. What is your recollection on that subject ? A. Well, it was 
the equivalent of that. 

Q. And then followed what remark from Governor ? A. I 
recall that ejaculation, “I feared so.” 

Q. That was after you had informed him of the approval by 
Governor Higgins? A. Of the former State Administration. I 
think I did not say Governor Higgins. 

O. You do not think you used his name? A. T don’t think 

I did. 

Q. That was 


A. The 31st of January. 









492 


Senate Judiciary Committed. 


Q. And have you now related substantially all the conversation 
you had with Governor Hughes ? A. I believe I have. 

Q. Did you reply to - A. The matter ran along a few 

days, and by inquiry or suggestion, from which side I don’t know, 
it was postponed a day or two. Then an arrangement was made 
by which it went over, I think, to Saturday or the following Mon¬ 
day. In the meantime, Governor Higgins -. 

By Senator Page: 

Q. What do you mean by “ It went over ? ” A. My reporting 
to him — my decision upon his request. Governor Higgins died. 
1 asked Mr. Fuller — went to see him or else he came to my office 
on some other matter; I made the inquiry as to this request for 
mv resignation standing over until after the funeral. He either 
said he woulel inquire or he subsequently let me know that he 
would. 

Q. And you finally wrote him a letter X A. I wrote a letter- 

Q. Under what date? A. I think it is dated the 12th of 
Februarv. 

Q. I show you a printed copy (handing paper to witness) ? 
A. I elon’t remember the day of the week. I actually wrote the 
letter at my sister’s on Sunday. 

By Senator Grady: 

Q. Wasn’t Governor Higgins alive when you were examined 

wO d 

by Governor Hughes ? A. Ho. This letter was not delivered until 
Tuesday, and I think Governor Higgins was buried the preceding 
Friday. 

Mr. Hatch.— The examination was February 18th. What was 
the date of Governor Higgins’ death ? 

oo 

Mr. Mayer.— Governor Higgins was buried on Friday, the 
15th, if my memory serves me. 

Senator Grady.-—Governor Higgins died on the 12th dav 
of February. 

The Witness.— He was buried Friday, the 15th. I have a 
memorandum of Governor Higgins’ funeral at 2:15 p. m., at 
Olean. 

Q. Is that paper I showed you the letter you wrote to the Gov¬ 
ernor? A. This is a copy of it. 

Q. A printed copy ? A. A printed copy of the letter. 

Mr. Hatch.— I offer that in evidence. 

(Admitted and marked Exhibit Ho. 137, and is as follows) : 










Testimony of Mr. Kelsey. 


493 


STATE OF NEW YOKE — INSURANCE DEPARTMENT. 

Albany, February 12, 1007. 

Hon. Charles E. Hughes, Governor, Executive Chamber, 
Albany, N. Y. 


Dear Sir.— I am unable to comply with your request for my 
resignation from the office of Superintendent of Insurance for the 
State of New York. 

The office was assumed by me May r 17th, 1006, after appoint¬ 
ment by Honorable Frank \Y. Higgins, then Governor, and con¬ 
firmation, by the Senate, the vote being unanimous therefor. 

I have served faithfully through months of overcrowding work 

t, o o 

and critical conditions arising from the San Francisco conflagra¬ 
tion, affecting the branch of fire insurance, and new statutes and 
changed circumstances resulting from the legislative investigation 
and report upon the affairs of life insurance. The department 
supervision of the elections of directors in domestic life insurance 
corporations added an immense volume of technical labor to the 
ordinary routine, and under new laws, preparation was necessary 
for the extended and complex statistical statements, standard 
forms, and reports hereafter required from life insurance corpo¬ 
rations, and the rulings and interpretation of new provisions regu¬ 
lating the transaction of their business exacted continuous deliber¬ 
ation upon and a decision of questions presented. 

In the arduous task I consulted frequently with the Attorney- 
General and advised Governor Higgins fully as to progress in the 
department. In several conferences and their results advice was 
sought and obtained from a prominent member of the former in¬ 
vestigating committee. My official conduct has received the ap¬ 
proval of Governor Higgins and has never been censured by any 
responsible person familiar with the facts and thereby appreciat¬ 
ing the difficulties encountered. 

Within a few weeks after my accession to office a plan for re¬ 
organization of certain branches of the department was suggested 
by me and has been since determined upon and will be carried out 
with the assistance of the Legislature and State Civil Service 
Commission. Information of this intention was also given to 
Governor Higgins and was approved by him. 

I most deeply regret what T believe to be a mistaken opinion 
upon your part prompting a demand for my resignation. There 
is no obstacle to your receiving from the Insurance Department 



Senate Judiciary Committee. 


494 

\ 

under mv charge the most cordial, disinterested and effective co- 
operation in all measures for the betterment of administration. 
There is no other desire in serving the people of the State than 
to discharge mv full duty to them and to the officers they have 
placed in control of the State Government. 

May I respectfully allude to the fact that, until the moment of 
announcing your purpose that I must retire from office, no intima¬ 
tion had ever reached me of your dissatisfaction with my depart¬ 
ment. You will recall that immediately after your inauguration 
as Governor, I addressed to you a brief letter stating my readi¬ 
ness at your pleasure and convenience to advise you as to affairs 
of the Insurance Department, to which a written reply w 7 as re¬ 
ceived to the effect that you hoped to make an appointment for 
me within a few days thereafter. Subsequently, at my sugges¬ 
tion, you received a typewritten copy of the text of my official 
report and expressed a favorable comment upon it. 

Between the time of your taking office anel your request for my 
resignation you have not given to me any expression of your views 
of my conduct of the Insurance Department nor have you called 
my attention to methods needing correction, nor to changes of 
plan or policy to bring the Department closer to a different con¬ 
ception of practical administration. So far as I am aw 7 are there 
has been no opportunity afforded upon any matter to test the 
promptness or willingness of the present Superintendent of In¬ 
surance to conform with the views of the present Governor relat¬ 
ing to the Department. 

Having entered upon a term of office fixed by statute at three 
years and conscious of no cause for abandoning it, I respectfully 

. remonstrate against the proposed summary disposition of my 
official life and invite the justice of considering the details of 
my administration prior to January 1, 1907, and a stating of 
your criticism and wishes with a view of bringing the Department 
into accord therewith, if possible. To resign under executive com¬ 
pulsion a trust imposed upon me by your predecessor would to 
the public appear as an admission of wrongful conduct in office, 
and would leave my character and reputation defenseless against 
any odious calumny inspired by any purpose and from any source. 
For many years I have borne an active part in State affairs and 
have steadily endeavored to merit the favor and confidence of 
good citizens. It has been my greatest reward to feel that I had 
succeeded in a measurable degree* From my point of view, a 


Testimony oe Mk. Kelsey. 


495 


surrender of my position in the manner required would forfeit 
my self respect and inevitably incur distrust in me by those whose 
good opinion I value. I feel most keenly that such action would 
be held in dishonor, and I am unwilling to subject myself and my 
family to such a sacrifice. In so deciding I recognize that the 
alternative of a removal by the Senate clouds my after life with 
suspicion, hut I cannot as an honest man do otherwise than abide 
by my convictions of duty. 

Respectfully, 

OTTO KELSEY, 
Superintendent of Insurance. 

The Witness.— I delivered the letter personally to Mr. Fuller, 
the secretary. 

By Mr. Hatch: 

Q. Mr. Kelsey, there was a reference made either in the exam¬ 
ination or in the message which was communicated by the Gov¬ 
ernor to the Senate, with respect to an appointment made at the 
solicitation of Andrew C. Fields. Do you know who that man 
is ? A. Mr. Cunningham. 

Q. What is his position ? A. He is the office clerk in the Hew 
York office. He is on the list as an examiner, but was detailed for 
clerical service in the office. 

Q. And are the duties that he performs subordinate. A. They 
are that of an ordinary clerk. He takes care of the office. 

Q. How old is he ? A. I should think he was forty-five — 
forty anv way. He has been in the Department twelve years. I 
did not know until the Governor asked me in the examination, 
that he ever had been recommended by Mr. Fields. 

Q. You did not know who recommended him? A. I didn’t 
know anything about it. He is a patient, faithful kind of office 
clerk. He has no more to do with directing the policy or business 
of the office than a window cleaner. 

Q. Let me ask you, during the course of your administration, 
has Governor Hughes ever visited your Department? A. Ho; I 
would not expect him to. 

Q. Ho, I do not mean since his accession to the office; I mean 
prior to that time ? A. Oh, no. 

Q. Do you know whether the Governor has ever made any in¬ 
vestigation of the matters to which your attention has been di¬ 
rected upon this examination ? A. I do not. 


496 


Senate Judiciary Committee. 


Q. Have you ever communicated to him or had an opportunity 
to communicate to him the condition respecting fire insurance as 
they existed at the time you took possession of the office? A. I 
have not. My letter of the 2d of January I expected would pave 
the way for a review of the situation — information to him of the 
full details. 

Q. During his professional life, prior to election, as Governor, 
had he ever had any business in connection with the Department ? 
A. None to my knowledge. 

Q. Do you know whether he had any information of the con¬ 
duct of the business of the Department, prior to his inauguration 
as Governor. A. I do not. 

Q. You never had any requests from Governor Hughes other 
than you have already testified ? A. I have stated in full all of 
the communications, and I never had the slightest intimation of 
any dissatisfaction or any criticism of the Department until he 
startled me with that demand. 

Q. For your resignation? A. For my resignation. The brief 
meetings-—with casual conversation — had been with great cor¬ 
diality, or had been to me cordial — had seemed so. I had no 
idea 5 was an object of dislike or distrust. 

Mr. Hatch.— That is all, gentlemen, that I desire to ask of 
Mr. Kelsey. There is a comparative statement of rulings that 
will come from the office which I desire to put in, in connection 
with Mr. Kelsey’s testimony, and I may desire to recall him; 
that is, as compared with former administrations. Now, we have 
other witnesses that we desire to call before the Committee. 

The Chairman.— Well, I suppose that we have arrived at that 
point now when the Committee ought to determine whether it will 
hear other witnesses or not. 

Mr. Hatch. : — Yes; and in order that that question may be pre¬ 
sented to the Committee, I ask that the Committee issue sub¬ 
poenas to summon witnesses before them to give testimony. 

The Chairman.— Will you furnish the Committee with the 
names of the witnesses ? 

Mr. Hatch.— Well, I may not be able in every instance to give 
the names of the witnesses. We have talked over the — about the 
number of, witnesses that we desire to call, and sometimes the in¬ 
formation may be obtained from either one or two persons, and 
we have not determined just which one will be called. 

The Chairman.— Could you so determine by Monday? 





497 


Testimony of Mr. Kelsey. 

Mr. Hatch. That is a pretty short time, as we separate now 
pretty soon. I will determine it and communicate with the Com¬ 
mittee — and the witnesses that we desire to summon. In addi¬ 
tion to that I will state that I desire to call Mr. Paterson and 
Mr. Appleton of the office here. 

I he Chairman. You would not expect a subpoena for the em¬ 
ployees in the office ? 

Mr. Hatch. Oh, no, I think not; just ask them to appear; 
that would be all that is necessary. 

If the Committee will permit, I stated to the Chairman of the 
Committee that I desired to facilitate in every way the conclusion 
of this investigation, and that we had under advisement the formu¬ 
lation in a deposition of the statements of the fire insurance 
officials of various companies, and that I thought perhaps instead 
of bringing them here to reiterate a great deal of the testimony 
which has been delivered by Mr. Kelsey, that we could so formu¬ 
late that deposition as to present to the Committee the views 
which we desire they should consider — the views which we desire 
them to consider in connection with those men, and that we shall 
try to do that in order that the investigation may be facilitated; 
and in that event, that, of course, will eliminate quite a number 
of witnesses upon the fire branch of the situation. It does not 
seem possible to do that with respect to the witnesses which we 
propose to call in relation to the life insurance part of the -in¬ 
vestigation ; but as to those we shall limit them to the least possi¬ 
ble number and present before the Committee men of character 
and standing and weight, whose testimony will be received with¬ 
out cavil or question; so that our purpose is to cut this down as 
much as possible, and the General and myself will have a con¬ 
sultation in Hew York at the earliest possible time in order to 
reach a definite, certain result upon that question. 

The Chairman.— Well, Judge, the Committee would like to 
take action on this question on Tuesday next. 

Senator Grady.— Tuesday? 

The Chairman.— Tuesday. So that if you will furnish the 
Committee a list of the names, if possible, or, at any rate, with 
the number of witnesses that you will ask to be subpoenaed by 
Tuesday, at noon, say 12 o’clock — 

Mr. Hatch.-— Oh, I think so. 

The Chairman (continuing) : The Committee will +<ke action 






498 ' Senate Judiciary Committee. 

and inform you of tlieir determination so that you may receive 
it by Wednesday morning. 

Mr. Hatch.— What date is likely to be fixed, in the event that 
the Committee grants the application to subpoena the witnesses ? 

The Chairman.— We will go on with this hearing on Thursday 
and Friday of next week. You can use Mr. Appleton and Mr. 
Paterson, I assume. 

Mr. Hatch.— Of course, those witnesses will not be long. 

The Chairman.— How long, Judge? 

Mr. Hatch.— Mainly for the purpose of corroborating Mr. 
Kelsey in that he passed upon all these rulings which have been 
submitted here, and that they are his rulings. 

The Chairman.— Can you dispose of their testimony in one 

session ? 

Mr. Hatch.— Oh, yes. There is this suggestion which I have 
to make, as I have informed the Chairman of the Committee, I 
doubted whether I should be able to be here at this session because 
I have a case set for trial, peremptorily, on Monday morning in 
Hew York, and it may be that they will take four or five days 
to try it. In that event I should not be able to appear here on 
the day on which you fixed, Thursday. 

The Chairman.— On Friday? 

Mr. Hatch.— I think we shall finish by Friday. I hope to, in 
any event, but I cannot answer for my adversaries. That is the 
situation, but on Tuesday morning we will furnish, in time for 
the action of the Committee a list of the witnesses, either of the 
number or the names, or both. 

The Chairman.— Yes, if possible. 

Mr. Hatch.— So that that question may be passed upon; and, 
of course, we renew the earnestness of our insistence that these 
witnesses be called. 

The Chairman.— Then, we had better fix next Friday for an¬ 
other hearing. 

Mr. Hatch.— Yes. 

The Chairman.— And upon that day you can probably get all 
the testimony of the witnesses that you will require. 

Mr. Hatch.— The Committee will understand that whether we 
will be able to furnish a deposition will depend to some extent 

to what extent, however, we are not advised, upon our ability 
ro compel the attendance of witnesses by virtue of subpoenas. 

The Chairman.— Then, do I understand that if the Committee 














Respecting Issuance of Sujjpcenas. 


400 


should decline to issue subpoenas that you would supply all that 
evidence by deposition ? 

Mr. Hatch.— Ho. I should conclude, if they did not "issue 

the subpoenas that I should not be able to supply any. 

The Chairman.— Do you think your lawsuit will be completed 
so we can go on next Thursday ? 

Mr. Hatch.— Well, I am not sure. Make it Friday. I am 
quite certain that I shall not be out of that trial in time to attend 
Thursday. 

The Chairman.— Well, I think that would be the best date to 
fix it — on Friday at half past ten o’clock in the morning. 

Further hearing adjourned until Friday, April 5, 1907, at 
10:30 a. m. 


Proceedings of the Senate In Re Otto Kelsey, Superintendent of 

Insurance. 


April 4, 1907. 

Senator Davis.— Mr. President, I offer the following reso¬ 
lution : 

The President.— The Senator from the 50tli offers the follow¬ 
ing resolution which the Clerk will read. 

The Clerk.—-“Whereas the Governor has transmitted to the 
Senate a message under date of February 20, 1907, recommend¬ 
ing the removal of Otto Kelsey from the office of Superintendent 
of Insurance; and 

Whereas, Said message was referred to the Judiciary Com¬ 
mittee; therefore, be it 

Resolved, That the Judiciary Committee of the Senate be, 
and they hereby are authorized and empowered to administer 
oaths, issue subpoenas, hear counsel, employ a stenographer, 
and have the testimony and proceedings in said matter printed.” 

Senator Davis.— I move the adoption of the resolution. 

Senator Armstrong.—As I intend to vote against this resolu¬ 
tion, I do not desire to have my position on this matter misunder¬ 
stood. I would like to speak briefly upon it. 

When the message of the Governor with the examination of 
Mr. Kelsey was transmitted to the Senate, it was referred to the 
Judiciary Committee to report to the Senate at the earliest time 
practicable, what disposition should be made of the matter. 








500 


Senate Judiciaky Committee. 


i 


.When the matter was taken up in the Judiciary Committee, 
it appeared that Mr. Kelsey had made a request to be heard. 
The Committee acceded to that request, and adopted a resolution 
that it would hear Mr. Kelsey with his counsel, and receive any 
depositions or documents that he or his counsel saw fit to submit; 
and accordingly, that hearing w r as entered upon. 

Soon after the proceedings were taken and the hearing of Mr. 
Kelsey was begun, the regularity of that procedure was chal¬ 
lenged, and it was suggested that the Committee had made an 
error in proceeding in that form; that it should have at the out¬ 
set, have entered upon a formal trial of the matter, procuring 
authority from the Senate to issue process, and to swear the wit¬ 
nesses, place them under oath, and authority to employ a stenog¬ 
rapher, and counsel, if necessary with all that pertains to a 
regular trial. The Committee differed with those who held that 
view, and a majority of the Committee adhered to its original 
proposition to hear Mr. Kelsey, personally, or by counsel, or 
both, with such documents or depositions as he saw fit to submit. 
The right of the Committee to issue process was challenged, and 
that challenge was held by those holding the contrary view. Bv 
reference to the legislative law, whereby at length it appears that 
a Committee of the Senate charged with an inquiry of this kind, 
has a right under the legislative law, to issue process without 
express authority from the Senate by virtue of the legislative 
law itself. 

the contention of the gentlemen who challenged the regularity 
of the proceedings of the Committee upon that point, was not 
sustained by the Committee, and it was resolved to proceed under 
the resolution adopted by the Committee, the substance of which 
I have stated, namely: to hear Mr. Kelsey and continue his hear¬ 
ing, and to hear his counsel, and receive such documents and 
depositions as he saw fit to submit. 

That hearing was proceeded with and the question of 
whether or not an oath should be administered to Mr. Kelsey 
was discussed. It appears that he requested, or his counsel de¬ 
sired, to have his statements made under oath. We were then 
hearing Mr. Kelsey in the Committee purposely because of his 
earnest request, -and we were trying to determine what should be 
done. 

Kow then, the administration of an oath to Mr. Kelsey at 
that stage of the proceedings, was not only irregular but un- 


Respecting Issuance of Subpcenas. 501 

called for. It was announced that Mr. Kelsey’s statement of 
facts would not be challenged, and they have not been so far as 
I know, and the adornment of his statement by an oath — I do 
not use the word “ adornment ” in any improper sense — but the 
giving of the statement under oath added nothing to its effect, 
and the Committee as a Committee was not proceeding under 
that order of business. It was as irregular as if we administered 
an oath to a man who appeared before the Judiciary Committee 
on a bill pending before it. It gives whatever adornment the 
oath gives, but I think it is uncalled for. 

I do not wish to speak for anybody now but myself in this 
matter. I do not speak for those who agree with me, much less 
those who do not. And I do not purport to speak for anybody 
connected with the State Government, and have no authority to 
do so. I am speaking solely my own opinion. I say the admin- 
istration of an oath to Mr. Kelsey was a mere regularity. It 
did no harm; it did no good; it simply added to the atmosphere 
of misunderstanding, as to what the Committee might determine 
should be the proper action in the case. For that reason I 
dissented from the direction of the Committee to its Chairman, 
to administer an oath to Mr. Kelsey if he requested it, and very 
informally stated my reason for that dissent. Row the hearing 
of Mr. Kelsey was concluded on Friday night, last, and as far 
as he and his counsel and his documents and depositions are con¬ 
cerned, they are practically in the possession of the Committee. 
We have arrived therefore at the point where it was proper to 
determine what should be done next. 

Row then, the immediate question arose as to whether or not 
there should be an application made to the Senate for power to 
examine witnesses, administer oaths, and employ counsel and a 
stenographer, and all of the accessories of a formal trial. 

There can be no question of fact, because the facts are not dis¬ 
puted. Row, then, there is an issue of fact, but with the facts 
undisputed, the issue is for the Committee to determine on the 
undisputed facts. One thousand witnesses cannot add to its 
knowledge of the facts as they are in issue. The facts being con¬ 
ceded, as they are, there is no objection to assist the Committee 
in reaching a conclusion by the summoning and swearing of wit¬ 
nesses, except to add to the amount of material before the Com¬ 
mittee, without aiding it in reaching its conclusion. For that 
reason in the Committee there was dissent as to this form of 



502 


Senate Judiciary Committee. 


procedure, and it was as vigorously contested as was proper and 
possible, that there should be no examination of witnesses, 01 
further delay, or anything but a speedy consideration of the 
order of business at which the Committee had arrived; that is. 
what we should next do with this recommendation from the 
Governor, and after considerable discussion in the Committee, 
it was resolved that the hearing should proceed on next Saturday, 
and on Thursday and Friday of next week; and that at the 
conclusion of the hearing on those days, to wit, a week from 
Friday and Thursday, that the Committee should close finally 
and definitely; and that during those days Mr. Kelsey might 
employ the time when the Committee should sit, for such pur¬ 
poses as he saw fit, and the production of such witnesses as he 
chose to produce, and the introduction of such testimony as he 
saw fit to offer. But that if when one week from Friday night 
came, there should be additional witnesses to be subpoenaed, who 
had not been produced, or through sickness of counsel, or en¬ 
gagements in court, or other reasons for other delays, that they 
should not be countenanced by the Committee, but that the hear¬ 
ing 'should properly close a week from Friday night, and that 
applications for further adjournments for further delays, should 
be refused. 

How when the gentlemen of the Committee who had been 
contending for this other form of procedure, which some of the 
Committee had thought was irregular, had reached the decision 
to terminate these proceedings, at some time, and under circum¬ 
stances where there could be no reasonable hope for further delay, 
it went further, to satisfy those of the Committee who had dis¬ 
agreed with them, that procedure might be indulged as we had al¬ 
ready gone away from the* regular course adopted by the Commit¬ 
tee. So the resolution was adopted that the hearing should go on 
on those days, and the hearing ending at the end of those sessions, 
and that the Senate should be asked for this authority to ad¬ 
minister oaths and engage any other accessories of a regular trial. 
I cannot see how anything can be added to the testimony by this. 

Mr. Kelsey has proven that he has been industrious. It was 
conceded. He proved that lie had been careful with the matters 
dealt with. That also was conceded. He lias proven that lie 
was honest, and it was not necessary for him to prove that. It 
was admitted in advance. The main issue is not touched by 
Mr. Kelsey, and it remains practically as it was on the day of the 


503 


Respecting Issuance of Subpoenas. 

recommendation from the Governor was received, without other 
light being given to the Committee than the proper explana¬ 
tion of Mr. Kelsey in relation to whatever was alleged in the 
communication which came to us with the recommendation for 
removal. 

In my view of this matter the situation is something like 
this: If I have a man in my employ, and he is not making good, 
and as to whose effectiveness, efficiency and capacity I have 
doubts, I probably would send for him and tell him that for some 
reason he was not making good; that I would like to know what 
he had to say about it; and he would tell me. Now, when we 
had finished that interview, there would be no other source to 
which I would appeal for information; I would be in position 
then to settle that question. The facts would be all in. Wit¬ 
nesses could not add to the sum of my knowledge. I had heard 
all the man had to say, and I would be in a position to determine 
the question for myself. But supposing that same man were 
charged by some one with having done some dishonest act, or 
some other act which attracted my attention, which made me 
think, if true, he should be dismissed from my service. I would 
call him and say: “ So-and-so said you did so-and-so. What have 
you to say ?’ Then I would listen to his statement. Then I 
would say, “ If you are correct, then perhaps you are not cen¬ 
surable ;” but that would not be this case. 

Senator Grady.— What would the Senator do if he and the 
other man were both employees ? 

Senator Armstrong.— If we were both employees, and I held 
the same relation to the man that I hold to Mr. Kelsey in this 
matter, I would look into the question far enough to find whether 
there was any question of fact. If there were no question of 
facts in the case, and I had a duty to perform, I would approach 
it courageously and firmly, and without any attempt to dodge 
the issue. 

Senator Grady.— The Senator has not answered the question. 

Senator Armstrong.— Whether 1 have or not, that is as well as 
I can do it at present. 

Now, the only thing that occasioned contention in the Com¬ 
mittee was the fear, first, and the disinclination to enter upon a 
regular and unnecessary procedure to determine this question; 
and, second, the fear that if entered upon they would open up 
matters not necessarily connected with if, and innumerable ques- 




504 


Senate Judiciary Committee. 


tions to fritter away our time. When the majority of the Com¬ 
mittee came to the conclusion that there should be a definite 
conclusion to the proceedings, it went far to satisfy the views 
of all the Committee. 

I do not yet wish to concur in this resolution, because I deem 
it both unnecessary and irregular to do so. I can see no reason 
why, with no issue of fact involved, that we should close this 
proceeding with the excesses of a trial in court. It is like a sub¬ 
mission of a case on an agreed statement of facts, as there is no 
statement contested, blow it can add to the testimony innumer¬ 
able volumes, but we will be no further advanced than we are 
now. I, therefore, propose to give vote against this resolution, as 
unnecessary, as irregular, as clothing this matter with a charac¬ 
ter which is unnecessary to its proper disposition; while at the 
same time saying that as long as it contemplates a definite end to 
this proceeding, within a reasonable time, and I see no special 
objection simply on the ground of delay, but I do wish to 
protest and by my vote to voice this protest, against entering 
upon an irregular and unnecessary course of process, of swear¬ 
ing the witnesses, and employment of counsel, etc., when after 
all that has been done and said bv the witnesses, we will be back 
in the same position that we are in to-day. 

Senator Hinman.— I do not intend to enter upon a discussion 
of the questions involved in this case. I desire to say this, how¬ 
ever; the time has come when each member of this Senate has 
got to discharge a duty which is imposed upon him by law, and 
bv reason of the recommendation which has come to uS, and 
each of us, from the Executive. 

-How, in the Committee, in the different proceedings that 
have been taken, the Senator knows 1 have taken the same po¬ 
sition he has taken on the proposition as to whether or not this 
was a hearing or a trial. But in this Committee the .question 
has come to each member of the Committee, and it will come 
to each member of this'body, as to what he should do. That 
time has not come yet. We are not now discussing the merits or 
demerits of this proposition. This question is not one that em¬ 
bodies the final action of any member in this body. A vote on 
this proposition does not commit any member of this body in any 
way on his final action. 

How each man here, must, when the time comes, satisfy his 
conscience and his judgment, and act accordingly. Some mem- 



Respecting Issuance of Subpcenas. 


505 


bers of that Committee say, and I assume members of this body 
will feel the same way, that there is a question involved here, a 
question of tacts ; and that the person whom we have heard thus 
far, the Superintendent, being interested, that the people of the 
State, and the members of this body must say, that being in¬ 
terested, his views of the situation might be prejudiced, might 
bo biased, and members of the Committee said that they felt that 
they should have whatever information and light it was possible 
to get upon the questions involved before finally determining the 
matter. 

By reason of that, and feeling that way, the majority of that 
Committee has voted to give the Superintendent the right to call 
disinterested witnesses before this Committee and take their 
statements. Whether or not it was necessary that those state¬ 
ments should be under oath may be a question upon which dif¬ 
ferent men would differ; be that as it may, no harm can come 
from administering the oath. This resolution strikes as it were, 
a final determination can be reached on Friday, of next week. 

Row, this is simply to give the opportunity for this man in¬ 
terested in this question an opportunity to present the witnesses 
he desires, and to give the members of this Committee and the 
members of this body, through the Committee, an opportunity to 
see what those interested persons would say. Whether or not 
what they may say, will change any man’s views; whether or not 
it will have any effect, or no effect, is not a question to be now 
determined. 

The question is as to whether or not this Committee having 
asked this body for the power to issue subpoenas and bring be¬ 
fore it, those in position to know the facts involved in this 
question; whether or not that Committee should be given that 

right. 

As far as I am concerned personally, I do not feel it was 
necessary to do it. Other members of the Committee felt it 
was necessary and right and fair, and that they wanted that . 
information before them before they w r efe finally called upon to 
decide and determine this question; and in as much as no mem¬ 
ber of this body should say to me that he desired further infor¬ 
mation on this subject, before he w r as called upon to discharge 
this duty, I should say, give him that information if it can be 
done without prejudice to anybody else’s interest; and that can 
be done here because this resolution fixes the final day as next 


50G 


Senate Judiciary Committee. 


Friday, and if the resolution goes through, no one is committed 
to any course, but it will permit this Committee to have before 
it persons who know the facts and conditions that have existed, 
and can explain them to this Committee. 

Now then this resolution calls for the appointment of a stenog¬ 
rapher, and I assume every member of the body will desire 
before acting on this question to have a printed copy of all the 
proceedings had before that Committee, before him, so that he 
may determine these questions understandingly, and know all. 
there is of it. 

Now, no harm can come from this. It places the situation 
where no one can say that he or anyone else has been deprived 
of the opportunity for full and fair hearing. It seems to me 
there should not be the slightest disagreement on this proposition. 
It seems to me also, that every member of this body without re¬ 
gard to what his own opinions may be, and without regard to 
how he may look at the duty he has to discharge, he should be 
willing to give this Committee what a majority of the Committee 
has asked in .this resolution to have given to it. 

Senator Armstrong.— Does not the Senator see that this privi¬ 
lege may lead to a request for its use for some witnesses who 
cannot be gotten at within the time allowed by the Committee, 
and that a week from Friday night he may still be confronted 
with the argument that he was not given a fair hearing because of 
the time-limit set by the Committee for closing. 

Senator Ilinman.— No; no. When we had given a reason¬ 
able opportunity to exercise those powers anyone has a right to- 
have exercised, we have done all that we could, and have abso¬ 
lutely fixed the final day for this hearing, the day upon which 
everybody must be heard or else not heard; and if they are not 
there within that time, then they are excluded from being heard, 
and I do not see how anv harm can come from that. Of course 

c J 

I agree with the Senator, and did from the start, that this matter 
is not here in the form of formal charges, and that this is not a 
trial. I do not think there is any escape from that conclusion. 

The objection is that this is in the form of a trial, but when 
you look at the proposition that each man here is called upon to 
perform a, sacred duty, a duty involving as much as this propo¬ 
sition does to the people of the State, and everybody concerned, 
and when anybody says he desires to hear some other man whose 
presence can be obtained, it seems to me not fair to that man if 




Respecting Issuance of Subpoenas. 


507 


we should not let him go as far as he could within the time set. 
Row then, another man who is not satisfied with the evidence 
here, might say he wants to hear something further before he 
casts his vote on the matter. Row, should we not then satisfy 
that desire as nearly as we can. 

In taking this position, I am not indicating in any way my 
final action on this matter, hut I am willing to waive my own 
views of what the proceeding is, and should be, for the reason 
that members of that Committee have said that they desired 
to have some other explanation of some matters, before they were 
called upon to act. I am willing that that desire should be 
satisfied. That is all they are asking for, and it seems to me 
that this resolution should not be defeated. 

Senator Saxe.— It seems to me that a little common sense 
view of the situation should straighten this matter out very 
quickly. 

Row I think in this matter we are in the same situation, or a 
parallel situation to the president of a corporation who is acting 
under the by-laws of that corporation, which may provide that 
the president may appoint and remove officers, employees, and 
so on, subject to the approval of the board of directors. 

Row here we have the Governor of the State, he is elected 
by the stockholders, the people; and the Senate, is sitting as a 
board of directors. We have, as directors, to continue the 
parallel, named a subcommittee, the Judiciary Committee, to 
take up this proposition and to report to us. As a Committee 
it had or has full opportunity as to the course that they may 
deem feasible. Row it seems to me that as long as we believe 
that the Judiciary Committee is acting in good faith, that we 
should stand by the recommendations of the Judiciary Com¬ 
mittee for the purpose of expediting the whole situation. That 
seems to be the common sense view of this matter, and for that 
reason I am in favor of this resolution. 

Senator Armstrong.— Row, Mr. President, taking up the 
parallel of the Senator from the 18th; supposing that when the 
Board of Directors were appealed to by the subcommittee for 
power to discharge their duties, it appeared that the subcom¬ 
mittee already possessed that power; would it not be right, for 
the board of directors to at least ask why they requested this 
additional power. 



508 


Senate Judiciary Committee. 


Let me read from sections GO and 61 of the legislative law, 
which define the powers of legislative committees: u Section 
60. Testimony before legislative Committees.— A legislative 
committee may require the attendance of witnesses in this State, 
whom the committee may wish to examine, or may issue a com¬ 
mission for the examination of witnesses who are out of the 
state, or are unable to attend the Committee, or excused from 
attendance, which commission, if directed by the House, or the 
legislature by which the Committee is appointed, may be exe¬ 
cuted during the recess of the legislature. A commission issued 
as provided by this section shall be in the form used in the courts 
of record of this state, and shall be executed in like manner. 
Unless otherwise instructed by the committee appointing them, 
the commissioners shall examine privately every witness attend¬ 
ing before them, and shall not make public the particulars of 
such examination.” 

How, section 61, is the one pertaining to subcommittees: 
“ Whenever any standing committee of either house of the legis¬ 
lature shall be required to make an inquiry or investigation, such 
committee may appoint a subcommittee of not less than three of 
its own members to make such inquiry, or investigation, and to 
take testimony in relation thereto; and such committee or sub¬ 
committee and the chairman thereof shall respectively have all 
the powers and authority which are conferred by law” upon any 
committee which is authorized to send for persons or papers, or 
upon the chairman thereof.” 

Senator Smith.— Will the Senator yield? 

Senator Armstrong.— Yes. 

Senator Smith.— Does the Senator contend that this Com¬ 
mittee now has the power to subpoena witnesses? 

Senator Armstrong.— I do. 

Senator Smith.— If that is true, is it because the Senate Ju- 
ty ttee was directed to make an inquiry or investi¬ 

gation ? 

Senator Armstrong.— That is also true. 

Senator Smith. 1 hen will the Senator please inform the 
Senate how an inquiry and investigation can be prosecuted in 
the usual and orderly way without proper production of witnesses ? 

Senator Armstrong.— The question is not pertinent, because I 
am arguing that- the Committee has that power under the legis¬ 
lative law. 





Respecting Issuance of Subpoenas. 509 

Senator Smith.— The Senator, as I understand, has been 
urging that they should not have that power. 

Senator Armstrong.— I protest against this as an irregular 
and unnecessary proceeding, and I wanted to add that while 
protesting that it is unnecessary and irregular to enter into that 
procedure at all, I add that the Committee has no necessity to 
ask the Senate for this power as it always did possess it under 
legislative law; so it might proceed in this particular without 
that authority. 

Senator Grady.— Where will the Senator find in the record 
of the Senate that a Judiciary Committee was appointed to make 
an inquiry or investigation ? 

Senator Armstrong.— Isn’t it the plain implication from the 
record ? 

Senator Grady.— Where will you find the record of the Senate 
which would give them authority to subpoena witnesses? 

Senator Armstrong.— In the resolution by which the matter 
was referred to the Judiciary Committee. 

Senator Smith.— I would like to ask the Senator this question: 
The Judiciary Committee having acted and decided that this 
hearing or examination shall be continued on Saturday of this 
week and on Thursday and Friday of next week, and on Friday 
of next week it shall be concluded; if it is true that the Com¬ 
mittee now has the power to subpoena witnesses, what, in the 
mind of the Senator, what harm can come from the Senate tak¬ 
ing such action as will make it certain that the Committee has 
power to produce those witnesses and swear them? 

Senator Armstrong.— I only need say that I tried to make 
that plain in my earlier remarks: That if it is necessary I can 
see no harm in it, since the Committee has agreed in the unani¬ 
mous conclusion to close the hearing next Friday. But in voting 
against this resolution, I simply want to voice my protest against 
an irregular procedure, of asking the Senate for a power already 
possessed by the Senate Judiciary Committee. I protest against 
that as unnecessary. 

Senator Raines.— I have failed up to this time to appreciate 
the necessity for the discussion of the Senator from the 46th, 
and I regret exceedingly that it has at this time been perpetrated 
on the Senate. As the introducer of the original resolution 
which was referred to the Judiciary Committee, which I drew, 
and in drawing I followed two precedents, the only two prece- 






510 Senate Judiciary Committee. 

dents of thirty years ; and fliat resolution was the same that was 
introduced in those two cases, one involving the removal of the 
Banking Superintendent and the other the Insurance Superin¬ 
tendent. The charges in those two cases were referred, under 
similar resolution exactly, to the Judiciary Committee to report 
to the Senate. I supposed the precedents would count for some¬ 
thing, and those Judiciary Committees in one case reported in 
favor of referring the charges to the Committee on Banks for 
an investigation and trial, which report was submitted to the 
Senate and voted upon by the Senate, and consequently was 
ordered and gained its only force from that vote of the Senate. 
The second, was in the case of the Insurance Superintendent, 
that the matter be tried before the full Senate ; and that resolu¬ 
tion only gained force from the fact that it was passed upon 
and debated by the Senate. 

It was with these two precedents 'before them that the Judi¬ 
ciary Committee by a vote of six to five, decided to go into an 
investigation themselves. JSTow the point I made when I came 
before the Senate Committee at that hearing was not that the 
Judciary Committee had not a right to adopt that course of pro¬ 
cedure, but that it had no right to proceed with such an investi¬ 
gation, until it had reported its resolution to the Senate, and the 
Senate had acted favorably upon it, and given them the authority 
to proceed. 

I do not believe that in the resolution to report the finding of 
the Committee to the strictest terms, there is carried with it 
a power to investigate, which as the Senator concedes, might 
necessarily carry with it the powers to subpoena witnesses, al¬ 
though he has held to the contrary all the way through this in¬ 
vestigation. But as I said before the Committee, I say now, 
that I am not disposed to criticise the Committee or anything 
except the fact that it did not see fit to report back to the Senate 
a resolution to confer upon them authority to proceed with the 
investigation. But having proceeded now, we come to the point 
where the question before the Senate is: Shall the man charged 
with offenses, shall the man charged with being unfit for'being 
Insurance Superintendent because he has neglected to remove 
certain men from office, charged with being unfit to be Insurance 
Superintendent because he lacked initiative and ability to prop¬ 
erly fill the place, shall he be permitted by this Senate to call 
further witnesses to substantiate his own statement. 


) 


Respecting Issuance of Subpcenas. 511 

The Senator from the 46th says: “ We are ready to admit 
that every statement the Superintendent of Insurance makes is 
correct, consequently there is no issue. There are no charges.’ 7 

Mr. President, if there were any charges ever made against 
the man under high Heaven, these are the charges against Otto 
Kelsey, which go to his ability, his good judgment, and to the 
propriety of continuing him in office as Insurance Superintend¬ 
ent of the State of Hew York. And while you have wiggled 
and wiggled to try and keep theses charges out of this case, you 
have got to face the charges, for they are charges, and most 
serious charges, and especially serious as coming from the source 
that they do. 

How the Senator says, that seeing that he is ready to admit 
the statements of Mr Kelsey to be correct, what further action 
is there necessary. There is no occasion for anything further, 
he savs, for anv further witnesses called to substantiate Mr. 
Kelsey, as he, so far as I know will admit that they are correct. 

I am surprised that he should have taken this position after 
an illustration which I put before the Judiciary Committee at a 
recent meeting, and which I am forced to call attention to again 
here, as in opposition to his argument. I want to suppose a 
case: Suppose Mr. Kelsey, instead of retaining the Senator 
from the 46th for one day and allowing a well-earned fee for his 
judgment and ability, of $100.00, had said to the gentleman, 
“ I shall desire your services for one hundred days, and for 
those one hundred days I will let you have $100.00 a day, mak¬ 
ing a total of $10,000.00.” Mr. Kelsey thought it was all 
right to do so. The Senator himself would say it was all proper, 
or he would not accept it. We get a new Governor and Mr. 
Kelsey still remains as Insurance Superintendent, and that 
Governor in looking over the record he finds a place where Mr. 
Kelsey as Insurance Superintendent had allowed the Senator 
from the 46th, a fee of $10,000.00 for one hundred days. He 
would say, in my judgment that was an outrage on the people 
of the State, and it demonstrates that this Insurance Superin¬ 
tendent has no proper conception of the duties of his office, in 
that, he is throwing away the State’s funds; and consequently I 
send a message to the Senate requesting his removal on that 
charge. 

We come to an investigation such as w T e have here, and Mr. 
Kelsey goes on the stand, and he swears in his judgment it was 


/ 


512 


Senate Judiciary Committee* 


a proper expenditure of the State's money, and that he got full 
value for it. The Senator from the 46th wants to go on the 
stand, and he says my services were worth that, and I rendered 
services to the State and received the money, and I earned it 
faithfully and honestly, and I do not think it is any more than 
I was entitled to, and we will take the word of Mr. Kelsey and 
we will take the word of the Senator as to his services, and 
somebody says: “Well, end this controversy right here. We 
do not dispute Mr. Kelsey and we do not dispute the ■Senator.” 
Here are the charges, what are you to do about it. t But the 
Senator says I want to substantiate my position that that money 
was fairly earned and legitimately paid and to substantiate that, 
I want to produce witnesses as to the value of the services 
rendered under the circumstances, and he wants to .call Mr. 
Lauterbach and Mr. Boot or Mr. Choate, or other distinguished 
attorneys to substantiate what he says. 

He would be the first man to kick; he would be the first man 
to cry “ unjust,” if he were refused the privilege of producing 
witnesses to show that the charges he made were proper and 
legitimate. And do you, think that evidence would have no bear¬ 
ing on the verdict of the Senate in a charge made for the removal 
of the Superintendent for that purpose ? 

I want to put that question right home to you, and I do not 
know how the Senator or anybody else should answer the propo¬ 
sition, that he should be refused the right to examine other wit¬ 
nesses to prove those services were worth what he claims they 
were, and that they were not unjustly compensated. 

How that is the case here. Mr. Kelsey’s statements go uncon¬ 
tradicted. They are admitted. But the question here is, the 
Governor who has sent this message into the Senate is a con¬ 
scientious man, most conscientious in my estimation, and in that 
message he says : ik In my judgment Mr. Kelsey was remiss in 
not removing two men; and therefore he should be removed.” 
It is charged that he is not up to the situation and lacks initiative 
and force and so forth; and therefore he should be removed.- 
Mr. Kelsey in his own behalf testifies to the contrary, and the 
Senator says, why that testimony is uncontradicted, and it goes. 

But Mr. Kelsey says: I want to corroborate my position 
and subpoena witnesses who are capable of testifying as to what 
I did, and who are capable of expressing an opinion that should 
have weight with every Senator, every Senator who will act as 


Respecting Issuance oe Subpcenas. 513 

a juryman about this circle, as to whether or not Mr. Kelsey’s 
contentions are correct or otherwise. And it has been, not for the 
purpose of criticising the Committee on Juriciary or any mem¬ 
ber of the Committee, but for the purpose of giving this man a 
fair opportunity to have competent witnesses subpoened and sworn 
before this Committee, and their testimony given to the other 
members of the Senate, that I have contended from the moment 
I came and sat in this circle one day for a few minutes, for a 
procedure that should be authorized by this Senate. It was 
absolutely necessary to give him the power to bring those wit¬ 
nesses before the Senate and have them sworn. Kow the Senator 
says: If he would confine himself to that and leave out the 
rest, I would not have had anything to say. We are entirely 
satisfied now to have these witnesses. There has been no man 
about this circle more anxious than I have been that this matter 
should come to a close. But in coming to a close I wanted to 
come fairly and justly. I want the man charged with offences 
to have the privilege of any man charged with offences in the 
State of Kew York, or charged with dereliction of duty, or with 
incompetence in such a place, to have the privilege of showing 
to this jury just what the facts in the case are. That is why 
I think this resolution should be passed. 

Kow, Mr. President, I do not know that I should allude to 
what appears in the public prints, for the reason that I have 
read in one place about myself that I have assured the Governor 
in a conversation that I was opposed to the removal of Mr. 
Kelsey. The correspondent draws from his imagination for the 
facts there. I have not said to the Governor, nor to any Senator 
about this circle, nor to anybody else, that I was opposed to the 
removal. Keither have I said that I was for Mr. Kelsey. I ha^e 
conceived up to this point that I occupy the position of a jury¬ 
man, under the Laws and the Constitution of the State of Kew 
York, and that it is my duty and my privilege to hear all that 
is said for as well as all that is said against, before coming to 
a conclusion in this case. 

But I want to read something else here, and I certainly hope 
the Senator can contradict it. I hope he will contradict it. I 
read: “ Senator Armstrong after seeing the Governor said : 

‘ I do not see why the friends of the Governor should not regard 
the vote as a substantial victory for their side.’ ” 

I have been unaware up to this time that there were any sides 

17 


514 


Senate Judiciary Committee; 


in this matter except the side that wanted to try to do justice. 
We may be looking at it in a different light from others, hut 
the fact prevailed and it is alluded to here, that some side or other 
had succeeded in having a resolution passed by the Judiciary 
Committee. 

I read again: “ In view of the great difference of opinion 

as shown in the Committee this morning, the selection of a 
definite day for the closing of the trial is certainly favorable 
to us.” ' j£g 

On which side is the Senator when he says: “ It is favorable 

to us ? ” Has he already, before the evidence has been produced; 
has he before counsel - has been heard, before the investigation 
is closed, has he already declared who “us” may be, and on 
which side we are ? I had supposed the Senator, like myself, 
was acting like a juror in this case, without prejudice. 

Senator Page.— As the Senator was speaking in this direction, 

I wondered if he addressed me. The Senator was speaking at 
me and I wish to know if he was speaking to me. 

Senator Raines.—'Ho; this is an interview said to be from 
Senator Armstrong. I do not take interviews always to be true, 
but I think it is worth while to call attention to the fact that such 
statements are made, and if it is so, it-puts the Senator into a 
position where he has no business to sit as a juryman in this 
case. 

Senator Page.— I am a little sorry the time of the Senator 
is to be taken up in this way, because the Senators from the 
forty-second and forty-sixth are unwilling to submit to the views 
of the Judiciary Committee. 

The ideas of the Senator from the forty-second were fully 
submitted to the Committee, and as to the necessity for going 
to the Senate for further power, and the resolution in that 
regard, it had been voted upon; and the Senator from the forty- 
sixth and myself stood together in the Judiciary Committee 
against the sending of this matter before the Senate for the addi¬ 
tional power, and we were voted down. It seems to me this 
should have ended there. I am going to vote to sustain the 
majority of the Judiciary Committee, and for this reason: That, 
it has been taking testimony for some time, and the thing that 
we who sit upon the Committee are interested in and that the 
Senate is interested in, is to get the facts concerning this matter 
in some form for intelligent action. 



Respecting Issuance of Subpcenas. 


515 


-Now it is necessary, as some of our brethren in the Committee 
thought, it is necessary if Mr. Kelsey desires to do so, for us to 
allow him to produce other witnesses. Some of us thought that 
in the shape in which the resolution was originally produced, it 
was not necessary. On the first proposition it was suggested 
that unlimited time should be given. The vote of the Committee 
was against the proposition; but when a limited time which 
seemed to the Committee to be reasonable was placed upon the 
taking of testimony it seemed to a majority of the Committee 
that that was a fair determination. 

Mow, a majority of the Judiciary Committee voted for that 
procedure. If it is not necessa'ry, and we are not so much in¬ 
terested, as long as we get the facts, whether the proceeding is 
called a trial, an investigation, an,inquiry or what. The thing 
we are to consider, no' matter by what vehicle the facts are 
brought to us, is the complete statement of the facts; and it seems 
to me it is not necessary to waste the time of the Senate in dis¬ 
cussing whether under the Legislative Law and the rules of the 
Senate and former precedents whether this is a trial, an investiga¬ 
tion or an inquiry. 

Having proceeded to this stage of our work, the only thing we 
are interested in is to get the facts and then act intelligently 
upon them. 

Let us take the evidence so far: The Committee has voted 
by a substantial majority that it desires to hear further wit¬ 
nesses. The question then comes up whether we have the power 
to issue the subpoenas for them. As the Senator from the twenty- 
fifth has said, there can be no harm in making it sure that we 
have, by passing a resolution giving this power. The Committee 
has voted to subpoena witnesses. 

Now, the Senator from the forty-sixth says that we have that 
power, and do not have to come to the Senate for it. Stall, if 
we have it, and the Senate votes to give it to us, it won’t take 
away any power that we have, and it may possibly supply any 
lack of power which some claim we haven’t at this time. I can¬ 
not see that the vote upon this proposition should be in any way 
cloudy by any other considerations than just the simple question 
of procedure; and the fact that the Committee of this House to 
whom we have sent these matters for consideration, has voted 
by a majority that they desire these further powers, I think they 
should be given to them. 


516 Senate Judiciary Committee. 

Senator McCarrcn.— Mr. President, I have endeavored as 
one of the judges in this case, to be as impartial and free from, 
prejudice as I could be. I have felt from the beginning, after 
reading the Governor’s message in which he recommended the 
removal of Mr. Kelsey, that charges have been preferred. I do 
not care what view is taken of it. W hile I know I am a very 
bad lawyer, yet I disagree with the best lawyers in the Senate 
if they say no charges have been preferred. 

Certainly, if the English language means anything, it means 
that Mr. Kelsey has been charged with incompetency and ineffi¬ 
ciency and unfitness for the discharge of the duties of the office 
he now fills. And knowing him as I have known him for many 
-years, I am free to say that I have no evidence so far as I am 
aware of the discharge of his duties in the respective official 
positions he has occupied, that would justify me in summarily 
saying he was unfit or inefficient. 

Kow I am willing that the evidence of his unfitness and in¬ 
efficiency, and his lack of ability should be demonstrated to'me. 
If I find that the charges are true, I want to say that I would 
feel it to be my duty to sustain the position of the Governor. 
But I feel that Mr. Kelsey is on trial notwithstanding the fact 
that some of the members of the Judiciary Committee claim he 
is not on trial. I say he is. And being on trial, it seems to me 
he should have all the latitude and all the privileges that are 
given to any man on trial. I think that he should be tried, not 
in the spirit of the vampire, and the wolf, who scent blood and 

^ v 

pursue it; not that he should be immediately seized and rent 
asunder, but I think he should be tried in a fair and impartial 
way, and every opportunity should be given to him to demon¬ 
strate that the charges preferred against him are unfounded, 
and to demonstrate his efficiency and his capacity and his ability 
to discharge the duties of the office of Superintendent of In¬ 
surance of the State of Kew York. 

Kow the Senator from the forty-sixth has used the illustration 
that we listened to this morning on another occasion. He has 
supposed a case in which an employer sent for an employee and 
said that he had heard he was incompetent;Ahat he was not dis¬ 
charging the duties of his position properly. Kow I want to say 
that every one of the Senators around this circle is an employer 
of this employee. I am one of the employers, and I confess 
I do not know whether Mr. Kelsey has been discharging his 



Respecting Issuance of Subpcenas. 


517 


duties properly or not. Probably the Senator from the forty- 
sixth does know: I am trying to find out. The Senator from 
the forty-sixth might be charged with incompetency and ineffi¬ 
ciency and with lack of ability to discharge the duties of the 
office'lie now holds. lie may think that the Armstrong report 
and investigation are to the life insurance world what the Bible 
is to the Christian religion. Well, I know people who do not 
think so; they think the insurance legislation was and is a very 
stupid act; unworkable, crude in conception and with many 
shortcomings. Some of the insurance people who have spent 
almost a lifetime in it sav that it is the crudest piece of legisla¬ 
tion ever enacted. They say that the election recently held under 
that act cost the policyholders about a quarter of a milliom dol¬ 
lars, and is liable to cost much more. That there are nearly 
five thousand election districts in the State of Hew York, and 
that in these life insurance companies there are as many voters 
as were voting in the last gubernatorial election; and they were 
compelled to vote at two election districts. I might point out 
the injuries which have resulted from the Insurance Law, and 
say because of that fact that the Senator from the forty-sixth 
is an incompetent Senator. 

How J want to say that I do not desire to discuss the merits, 
of the question as to whether Mr. Kelsey should be removed or 
not. But I do say, in all fairness, that he should be permitted 
to have an opportunity of presenting his case in the way he wants 
to present it, so that it cannot be said hereafter that anything 
has been denied him which might place him in a position to 
show that he was not guilty of that with which he is charged. 

For that reason I believe that the action of the Judiciary 
Committee should be sustained, and we should show by our 
disposition to treat the matter fairly, that we are acting impar¬ 
tially, as we should act in our capacity here as individual judges, 
which position we must occupy when we finally dispose of the 
question. 

Senator Grady.— I happen to be the indirect cause of all this 
excitement, and I want to justify myself in some measure. 

The Senator from the forty-sixth is entirely mistaken in think¬ 
ing that the Legislative Law of and by itself gives to a committee 
the right to subpoena witnesses. If that were the case there 
would be no neccssitv in every resolution under which a wit- 
ness was ever subpoenaed, reciting that the Committee had that 


* 



518 


Senate Judiciary Committee. 


power: And the Legislative Law in using the words “ may 
have that power ” means that it may when given the power of the 
body from which it proceeds, or by vote of the Senate and the 
Assembly if it is a joint committee, exercise it in the manner 
prescribed by Legislative Law. So we are not doing a useless 
thing in asking the Senate to give us a power which can only 
be given to us directly and by special authority of the House.' 

This is the first time I have ever heard it urged that a com¬ 
mittee, simply because of being a committee, had the power to 
subpoena witnesses. The real purpose of that part, of the resolu¬ 
tion was that at the hearing before the Committee the counsel 
for the accused informed us that with a subpoena properly issued 
from our Committee he might save us the time of hearing wit¬ 
nesses orally, and would probably be placed in a position where 
you might submit their depositions; and asking for the power to 
issue subpoenas upon the part of the Committee is intended as a 
saving of time. 

How, it was not necessary for the Senator from the forty- 
sixth in order to make his position clear, if it ever was clouded, 
to undertake to sum up the case; and I am not going to be be¬ 
trayed into a review of the evidence as far as disclosed, but it 
seems to me to be a begging of the question to say that no facts 
are involved. 

The line of reasoning pursued by the Senator is that the man 
is accused of being a bad man; and he says: “ Ho, I am a 
good man." Tie is accused of being an incompetent man, and 
he says, u Ho, I am not an incompetent man; I am thoroughly 
competent.” But, the Senator says, “ Still you are a man, 
and as long as you are a man there is no question of fact in¬ 
volved.” How, that is the only way in which the Senator can 
reach the point that this presents any question of fact. There 
has been no action taken by the Committee so far as I am aware 
that justifies any one in s'aying what the final acts of' the Com¬ 
mittee as a committee will be, or what the final action of any 
member of the Committee as a Senator will be. We have dis¬ 
cussed proper modes of procedure. Upon that there has been 
a marked individual preference, and that preference has been 
shown in an eminently proper way; afid I want to commend 
the position taken by the Senator from the nineteenth, that with 
views as decided as any Senator could have as to a proper mode 
of procedure, disagreeing with the conclusion at which a major- 


Respecting Issuance of Subpcenas. 519 

ity of the Committee has arrived, he yet recognizes that there 
is a loyalty on the part of members to the action of their Com¬ 
mittee, which not only justifies hut commands their support of 
the Committee’s action upon the floor. 

And I want to say that there is not any difference in the reso¬ 
lution finally adopted by the Committee, and the resolution which 
I suggested for their consideration so far as the particular ques¬ 
tion is concerned, except as to the form — the substance being 
affected in no way, and the suggestion being made that the in¬ 
quiry should close on. the 12th of April it was at once agreed to. 
There never was a suggestion that it should be prolonged a day 
beyond that time. There has been no occasion when there was 
anything before the Committee to justify even a suspicion that 
any member was undertaking to prolong this investigation one 
hour beyond what was necessary for a fair presentation of the 
case of the accused. I wish to say, without undertaking to pass 
upon the question involved in the charges, that I have been as¬ 
sociated for some years with the present Superintendent of In¬ 
surance, and in his sendee as a public officer he has never been 
criticised either by the public or his associates or superiors. lie 
deserves at least a generous consideration of his case. Whatever 
may be the final judgment passed upon this recommendation 
of the Governor, Otto Kelsey can point to a service in the State 
Assembly full of merit, rich with what he has accomplished for 
the public good, and in'his work in the station to which he was 
elected by the people he showed a devotion to the public interest 
that merits something of gratitude, not from those who may be 
attached by political ties, but gratitude from those who may 
disagree with the view that the Governor of the State is the em¬ 
ployer and the Superintendent of Insurance is the employee. 
I scout that notion; and wherever you find it, it is being urged by 
those who lose sight of the fundamental principles upon which 
our Government rests. If the Governor of the State occupies the 
position of employer and the Superintendent of Insurance is 
simply the employee; if it is for the Governor as the employer 
to judge whether the employee is making good, wdiy does the 
law require that he shall submit to us the reasons why in his 
judgment a public officer shall be removed ? 

Just as was stated by the Senator from the eighteenth, the 
best that can be said for the position of the Governor is that he 
is the president of the corporation, and that the Superintendent 


520 


Senate Judiciaiiy Committee. 


of Insurance is the superintendent of one of the departments of 
the corporation; and that we are the authority, we are the hoard 
of directors, the authority. 

Let it not he forgotten that we are the authority to decide 
whether he has made good; and in deciding whether he has made 
good I suppose that every member of this Senate is willing to 
take into consideration every fact and every circumstance that 
could he legitimately offered for the Superintendent in proving 
how he discharged his duty. 

Now, then, we ask here that the testimony may be printed 
and given to the members. Isn't that necessary ? Isn’t that re¬ 
quired to give the information to this body as to just what the 
facts are and the circumstances with which the Superintendent 
of Insurance has to deal ? I want to say that the suggestion that 
’at any time there was an attempt upon the part of anybody to 
avoid reaching the prompt judgment of the Senate upon this 
case, is not borne out by any circumstances with which I am 
familiar. 

I regret very much at this time that this debate should have 
taken place; but to the interested observer it must have been 
apparent that these matters have been brewing or fomenting, 
and that sooner or later it would be necessary to remove the vent 
and relieve the exhaust ; and that having been done, I trust that 
we can approach this important subject with unprejudiced and 
unbiased minds, having only in mind that which is to the best 
interests of the people of this State. 

Fearing that the procedure adopted by the Judiciary Com¬ 
mittee might be misunderstood, by reason of the precedents 
alluded to by the Senator from the forty-second, I wish to call 
the Senator’s attention to the fact that the Judiciary Committee 
did not doom the message received from the Governor similar 
to the charges preferred against the Superintendent of Banks 
or the Superintendent of Insurance, Smythe. In the two cases " 
alluded to as having established a precedent, those charges were 
made by these outside parties, sent to the Governor and, by the 
Governor, transmitted to the Senate for its action. The Senate 
saw fit to conduct a trial in each one of the cases, and adopted 
a procedure looking to that end. This case, however, to my mind 
assumes an entirely different aspect. Under the Public Officers 
Act, the Governor of this State could send to the Senate a mess¬ 
age, as he did in this case, and upon its receipt in the Senate, 


Y 


Respecting Issuance of Subcenas. 


521 


tlie Senate could then and there adopt a resolution either to con¬ 
cur in the message or to not concur, and the vote then taken 
would decide the whole matter. But instead of that being taken, 
the matter was referred to the Judiciary Committee. Upon 
its receipt, or shortly thereafter, the Committee received a com¬ 
munication from Superintendent of Insurance Kelsey asking to 
be heard. How the Committee granted that request. . Had the 
Superintendent failed to ask for a hearing, the Committee 
could then and there have determined whether or not to recom¬ 
mend a concurrence, or non-concurrence and reported to the 
Senate, without having given anybody any hearing or taken 
any testimony in the matter; but the Committee saw fit to 
hear and give Mr. Kelsey a hearing. How, I believe that 
that is perfectly legitimate and entirely within the authority of 
the Committee to do; so that all the proceedings of the Com- 
fmittee were regulated up to the act of the Committee on yester¬ 
day. How, it was thought best by a majority of the Committee 
to hear witnesses, and for that purpose, Mr. President, this 
resolution lias been prepared; and we ask for authority to sub¬ 
poena witnesses, to employ a stenographer to report the testimony, 
and to have the proceedings and the testimony printed and placed 
upon the desks of the Senators. That is all we ask and the 
resolution ought to be adopted. 

Senator Armstrong.— Just a personal word because of the 
remarks of the Senator from the forty-second. He and I have 
been friends for a good many years and have been sincere. I 
have not desired to say anything offensive to him; I certainly 
have not said anything that could be construed to be offensive 
to him. I have said nothing to a newspaper man or anyone else 
which could be deemed to be a libel or an attempt to malign him 
or any member of the Committee on this question. I would not 
presume to do such a thing. What I have already said is plain. 
That I regret the outcome of yesterday’s meeting of the Judi¬ 
ciary Committee. I do not claim to speak for those who have 
been contending for a speedy determination of the pioceedings. 
I believe that to be so. So far as that idea is concerned, it. is 
probably correct. So far as it attempts to malign any man on 
the Committee upon this question or attempts to indicate a desire 
to speak for the Executive, or to determine who were the friends 
of the Governor or not, I of course disclaim it. I want to say this 
as publicly as I can, because I may not have an opportunity to 

repeat it. 



522 


Senate Judiciary Committee. 


\ 


Senator Raines.— This lias turned out as I supposed it would. 
It is here in quotation marks. However, I accept the denial of 
the Senator as a matter of course. I have no occasion to believe 
that such a statement as that in quotation marks could properly 
represent him or his views — the Evening lelegram of Hew 
York. I don’t think there is any personal difference whatever. 

] have tried to illustrate my position; I have done it as a matter 
of argument, paying all due respect to the Senator, in whose 
judgment and ability I have the greatest confidence. 

Senator. 'McCarren.— I desire to ask the indulgence of the 
Senate long enough to say that I trust that the misunderstanding 
between the Senators from the forty-second and forty-sixth, and 
its subsequent explanation, will have good effect. I take it that 
hereafter anything we see in the public prints will he regarded 
as untrue, because I assume that every Senator disclaims the 
charge that lie appoints any newspaper as his spokesman. The 
Governor has already taken opportunity to explain that he has 
not delegated the power to anybody to speak for him. 

The President.— How, the question of the adoption of the 
resolution. 

( Unanimously tarried.) 

Roll call. 

Senator Armstrong.— Having, I think, by this time made my 
position clear, I am going to withdraw from my original inten¬ 
tion and vote for this resolution. 

Senator Colialan.— I want briefly to say in voting for this 
resolution of Senator Davis’ that I think this matter has been 
gone over and thrashed out so much in the Committee, that any 
opposition to the resolution is ridiculous. I want to say further 
in voting for this resolution and acting on this Committee, in 
order that there may be no misunderstanding on the part of any¬ 
body, that I am acting neither as the friend of Governor Hughes 
nor the friend of Mr. Kelsey. I am not acquainted with either 
of the gentlemen. I withdraw my request, and vote on it. 

Senator Franchot.— I desire to he excused from voting, hut 
I make this statement of my position. It comes down to a differ¬ 
ence of opinion as to the conduct of a great office between two 
distinguished servants of the great State of Hew York; and the 
one who is accused by the other — for these must he charges,, 
or they are simply an academic paper presented to this Senate — 
I believe that these charges should be investigated to their finality. 







Testimony of Mr.- Backus. 


52 ? 


1 believe that he against whom these charges are presented should 
have every facility to present his side of the case. In short, should 
have, Mr. President, Iris day in court, as every American citizen 
has the right to have; and, therefore, without taking up the time 
of the Senate any more, I desire to be registered in the affirma¬ 
tive on this question. 

Senator Fuller.— Mr. President, I simply wish to say that 
I concur entirely in the position taken by the Senator from the 
nineteenth. It seems to me he has stated the whole case in a 
very few words. I vote “Aye.” 

Ayes 48. • 


Proceedings Before Senate Judiciary Committee In Re Otto Kelsey, 

Superintendent of Insurance. 


Senate Chamber, Capitol, 

Albany, April 11, 1907. 

Proceedings Before Senate Judiciary Committee in re Otto 
Kelsey, Superintendent of Insurance. 

Senator Davis presiding. 

V 

Present. — Counsel as before. 

i 

The'Chairman.— The Committee will be in order. 

. Mr. Hatch.— General Mayer will conduct the examination of 
the witness — Mr. Backus. 

J. Bayard Backus, called as a witness, being duly sworn, tes¬ 
tified as follows: 

Mr. Mayer.— Before interrogating Mr. Backus, if the Chair¬ 
man and the Committee please, we desire to place in evidence 
extracts from certain newspapers. Your Committee will remem¬ 
ber that there were some inquiries made as to the date of Mr. 
VanderpoeTs resignation, and that Mr. Kelsey testified that it 







524 


Senate Judiciary Committee. 


had been personally delivered to him on January 14th, but that 
he, Mr. Yanderpoel, asked Mr. Kelsey to hold it until announce¬ 
ment was made from Yew York, and you will also recall that the 
file-mark showed the date of January 18th. 

I put in evidence an extract from a newspaper published in 
the city of Yew York, known as The Evening Mail, under date 
of Thursdav, January 17, 1907, as follows: 

“ Isaac Yanderpoel resigns office. Albany, Jan. 17. Isaac 
Yanderpoel j chief examiner in the State Insurance Department, 
has tendered his resignation to Superintendent Kelsey, to take 
effect February 1. 

“ Superintendent Kelsey said Mr. Vanderpoel’s resignation was 
voluntary, and that he had accepted an offer from an insurance 
company.” 

Also a co_py of the Yew York Sun of the following day, Friday, 
January 18, 1907, containing an article entitled: 

“Chief Examiner Yanderpoel Resigns. Albany, Jan. 17.— 
Chief Examiner Isaac M. Yanderpoel of the State Insurance De¬ 
partment has tendered his resignation to Superintendent Kelsey, 
to take effect on February 1. Superintendent Kelsey says that 
the resignation D purely voluntary and that Mr. Yanderpoel 
resigns to accept a lucrative position with an insurance corpora¬ 
tion.’ 7 

Also an announcement in the Yew York Tribune of January 
18, 1907, and an announcement in the Yew York Journal of 
Commerce of January 17, 1907, which are to the same effect. 

By Mr. Mayer: 

. Q. Mr. Backus, you were subpoenaed to come here? A. Yes, 
sir. 

Q. What is your occupation ? A. I am a lawyer, sir. 

Q. Where is your office? A. One hundred and forty-one Broad¬ 
way. . • Y 

Q. Just a trifle louder. A. One hundred and forty-one Broad¬ 
way. 

Q. And you reside where? A. One hundred and seventy-one 
West Seventy-third street. 

Q. In the city of Yew York? A. In the city of Yew York. 

Q. Are you one of the inspectors of the election now pending 

Q. By whom were you appointed ? A. Superintendent Kelsey, 
in the Mutual Life Insurance Company? A.* I am, sir. 


Testimony of Me. Backus. 


525 


Q* recall the date when you took the oath of office as 

inspector ? A. Seventeenth of December, 1906. 

Q. Where was that oath taken? A. At the office of the Super¬ 
intendent in New York city. 

Q. At 11 Broadway ? A. At 11 Broadway. 

Q. AY ho was present? A. All of the ten inspectors for the 
two companies — the New York and the Mutual Life; also an 
expert from Price, AYaterhouse & Co., one of the partners, and 
Ylr. Nevins — I don’t know his firm’s name — who acts for the 
New York Life. 

Q. Mr. Nevins, a member of the firm of accountants acting for 
the New York Life? A. The New Y r ork Life; yes, sir. 

Q. Did your board organize that day ? A. It did. 

Q. AA 7 ho was elected chairman? A. Mr. Alexander Kice Me- 
Kim. 

Q. By whom was he elected ? A. By the five inspectors. 

Q. W as th ere any direction given by anybody as to his selec¬ 
tion ? A. Not the slightest, sir. 

Q. AA T hat was the date of the election? Just fix it conveniently. 
A. December 18, 1906. 

Q. The following day ? A. The* following day. 

Q. After your board organized what was the first thing that 
was done; that is, did any of you gentlemen go over to the officers 
of the Mutual Life ? A. Mr. McKim and myself went over 
there; it was rather late. 

Q. AAull you state briefly what you saw on that occasion? A. 
AA T e called to see the board room where the meeting of the Com¬ 
mittee was to be held, and the facilities for carrying on the work. 
AA T e also went downstairs. AA T e understood that the International 
Committee were watching the ballots. The ballots were brought in 
and put in the vault in boxes. 

Q. AA T ere the boxes sealed ? A. They were nailed. They were 
not sealed. 

Q. I will,ask you to state in round numbers the total number 
of papers, known under the law as official statements and popu¬ 
larly as ballots, which came under the jurisdiction of the in¬ 
spectors? A. 309,790. Three hundred and nine thousand in 
round figures. I have it on my paper, of course. 

Q. That embraces the Mutual Life alone? A. Mutual Life 
alone. 

Senator Eaines.— IIow many inspectors were to count those ? 

Mr. Mayer.— Hive. 





52 G 


Senate Judiciary Committee. 


Q. Before you explain the processes, will you tell the Com¬ 
mittee whether accountants were employed ? A. It was arranged 
that w T e were to employ such clerical forces and accountants as 
might he necessary to do the work, by arrangement with Mr. Kel¬ 
sey at his office the day before election, and he said that these two 
firms of experts might be employed if we chose to employ them. 

Q. Did you employ them ? A. We did later. 

Q. In addition, did you employ clerical help ? A. We did. 

Q. What instructions, or advice, if any, were expressed by Mr. 
Kelsey in regard to your duties in relation to the election? I am 
now referring to the day that you testified to when you were 
sworn in ? A. He told us substantially that he was going to put 
the wdiole matter of the canvassing of the ballots in our hands, 
as he did not think it proper for him as Superintendent of In¬ 
surance to have anything to do with it in that respect. 

Q. Was anything said as to where appeals from your decision 
would lie? A. I do not think there was, but my impression is 
that, the Ballot Law and the whole law requiring us to keep the 
ballots for four months after the election was completed, subject 
to an order of any tribunal having legal jurisdiction, was suffi¬ 
ciently explicit in that regard. 

Q. Tell in your own way the situation in connection with 
the undertaking of your duties and carrying them through — 
the incidents and processes connected with the counting of the 
votes ? A. I do not believe that anyone who has not been present 
in the board room of the Mutual Life for the last few weeks 
can realize the amount of detail work and the mass of work which 
the inspectors have had confronting them. If Mr. Kelsey had 
not provided in advance for the inspectors by the employment 
of clerical assistants and accountants, and the inspectors had 
been obliged themselves to have counted the ballots, occupy¬ 
ing only one minute to each ballot— and it would on v the average 
have been lodger than that — that it would have taken the in¬ 
spectors 833 days to have canvassed the vote. I have had quite 
a little experience in canvassing in political elections, and I think 
the job would have been simpler to have canvassed the total vote 
of the borough of Manhattan than the vote that we have had to 
canvass. It is remarkable the number of parties attempting to 
vote, intelligent people, men whose names you would know, who 
have not been able to comply with the simple requirements with 
all the instructions which they have had. The votes, of course, 



Testimony of Mr. Backus. 


527 


are of different shapes and sizes. There are some eight or ten 
different ballots put in there. The law requires that the in¬ 
spectors should receive the ballots and proxies and all challenges 
on the day of election, subject to verification and the ascertain¬ 
ment of the validity thereof and of the qualifications of the voter 
afterwards, and then goes on to say that they are to count the legal 
votes cast. Now, in view of that situation the counsel — I do 
not know whether I am talking too low or too loud, but I am 
endeavoring to get my voice up — in view of that situation, 
and in view of the fact that so many people were interested in 
this election,' and that the representatives of the several tickets 
had engaged the services of very eminent counsel, and also in 
view of the fact that the law was more or less indefinite — the 
provisions of the law were more or less indefinite, the inspectors 
did not feel that they were justified in proceeding until they had 
heard counsel. We did not succeed in securing the attendance 
of counsel and hearing their arguments until the 7tfi of January. 
At that time they submitted printed briefs, and some briefs which 
were typewritten, and argued, I think, for four hours and a half. 

Q. Let me interrupt you there, Mr. Backus. I notice that you 
state that counsel delayed some. May I ask how it was; what 
request was made in that regard? A. I do not know that that is 
a proper question to ask me as an inspector ; we have not certified 
the count yet. 

Q. I just want to bring out entirely clear whether it was in the 
delay of the inspectors? A. In the first place, we did not delay 
the matter on account of waiting for counsel. , We had a hun¬ 
dred girls employed opening those ballots, and pinning the en¬ 
velope and the ballot together; writing cards with the name and 
address and the policy number on them, so that we could go 
ahead with the work as soon as the counsel had been heard. 

Q. Then as I understand while you were waiting to hear this 
argument, which took place on the 7th of January, a clerical force 
consisting of a hundred girls vrere stapling the envelopes and the 
ballots together? A. Yes. 

Q. And the cards were being written? A. Written, and the 
cards and envelopes numbered to correspond with the serial num¬ 
ber on the card. I want to say something later about those cards. 

Q. Now, when you identify these documents, may I ask you 
if this brief which I now hand you, entitled “ In the Matter 
of the Election of Trustees of the Mutual Life Insurance Com- 


528 Senate Judiciary Committee. ; 

pany of New York. Memoranda, submitted to the inspectors by 
James McKeen, counsel to the corporation/’ and a brief similarly 
entitled and headed “ Brief for administration ticket/’ submitted 
by Mr. Beck, and a brief similarly entitled and submitted by 
Mr. Untermyer on behalf of the International Policy-holders’ 
Committee, were the briefs presented to the inspectors on January 
7th? A. They were, sir. 

Q. In connection with the oral argument? A. Yes, sir; before . 
the oral argument they were presented; they presented them the 
night before to us, sent them up to us. 

Q. Was Mr. Kelsey there on that occasion? A."lie was there 
while the argument was going on, sat with us. 

Mr. Mayer here offered in evidence the three papers referred 
to in the last question, and they were marked respectively Ex¬ 
hibits 139, 140, and 141. 

Q. Can you state to the Committee, just in a brief outline, 
what the general character of the argument was and to what 
questions it was addressed? A. Well, the argument went to sev¬ 
eral points; the first point brought out was in regard to the Albany 
list. Then the main point that the International Policy-holders’ 
Committee wished was that we should substantially assume judi¬ 
cial powers and take testimony as to matters which occurred 
prior to the 18th of December, 1906, which would have tied us 
up for years, naturally. 

Q. Of course, the briefs themselves show? A. Yes. 

Q. But, broadly stated, did the argument cover the range of 
questions as to challenges, questions as to validity of ballots and 
questions as to your powers under the Statute? A. Yes. 

Q. How, after hearing this argument and going over the briefs, 
what the inspectors do? A. They met at the Bar Association 
the same evening, passed their resolutions and made their rulings. 

Q. Have you a copy of those rulings with you? A. I have, sir. 

I want to say that there are three rulings here. We had one 
hearing then, but as the vote progressed other points came up and 
counsel were heard twice after that, I think. You will find three 
sets of rulings there. They comprise our full set of rulings. 

Q. So that the paper which I now show you contains your rul¬ 
ings upon the occasion of January 7th? A. I can give you the 
dates, if you wish that on the record. 

Q. And aBo state the other dates. A. These rulings were put 


Testimony of Mr. Backus. 


529 


out on January 9th. They were passed by us on the 7th, but 
they were' put out on the 9th. The second set was put out on 
January 11th, and the last on January 14th. 

Mr. Mayor.— I will read the rulings and give an idea to the 
C ommittee of the character of the questions read. 

1 lie Chairman.— Gentlemen, you will give them to the stenog¬ 
rapher afterward. 

Mr. Mayer.— Yes, sir. 

t/ 7 

Mr. Mayer.— Reading Ruling 1STo. 1. 

1 he board will canvass all ballots, including the so-called 
Peabody and Olney ballots, which are prima facie valid and ap¬ 
pear to have been lawfully cast, subject to verification and ascer¬ 
tainment by the board of the validity thereof and of the qualifi- 
. cations of the voters by the books and records of the company. 
The board does not deem it necessary to decide at the present time 
what is the nature or extent, of its powers, but reserves decision 
as to its rights of further verification and ascertainment in respect 
to grounds of challenge not appearing on the face of the ballots.” 

Q. For the information of the Committee, referring to the 
designation of the so-called Peabody and Olney ballots, will you 
state what those ballots were and what was the character of the 
objection ? A. The Peabody ballot was a ballot which bore simply 
the names of the administration ticket without any writing at the 
top to show that it was the administration ticket at all, which was 
accepted by the board on the ground that,’ it was suitably written 
as defined by section 94. The Olney ballot was objected to on 
the ground that the ballots were not delivered to the company 
within the meaning of the law, but were sent to the International 
Policy-holders’ Committee, were there opened, and sealed at the 
ends and delivered to the inspectors on the day of the election, and 
the inspectors ruled that they were delivered to that Committee, 
as they were not handed to the company. 

Q. The Peabody ruling involved a ruling upon administration 
ballots and the Olney upon the International Policy-holders’ bal¬ 
lots entirely? A. Substantially, yes, sir. 

Mr. Maver.— Ruling Yo. 2. 

“ It is not necessary for a policy-holder’s name to appear upon 
the official lists filed in pursuance of the provisions of section 94 
of chapter 326 of the Laws of 1906, in order to entitle him to 

vote.” 


34 



530 


Senate Judiciary Committee., 


Q. Now, referring to the ruling No. 2, relating to the official 
lists, familiarly known as the Albany list, will you state what was 
the question therein involved? A. The Board did not deem the 
Albany list to be a registration list; in fact, the Mutual Life 
Insurance Company were unable until the last day to file a list 
at Albany alphabetically. They do not keep their records by 
names; they keep them by the number of the policy. Therefore, 
they had great difficulty in getting it out, and that list was only 
alphabetized to the first letter of the name; so that Aaron Aarons, 
which on an ordinary list would be almost the first name, might 
be anywhere in that space, and it would be impracticable really to 
compare with it. 

Q. When you say “ that space ” you are referring to a space 
where a number of a’s might be? A. Yes. 

Q. Now, for further reference, as I understand it, the Mutual ' 
Life has a policy register, has it not ? A. General policy register. 

Q. And its method, as I understand you, was the numericaliz- 
ing of the policy, so that if reference was desired to their books 
it would ordinarily be to the number of the policy ? A. It would 
indeed, and the actuary’s books have only numbers, no names at 
all to them; so that the number must be correct to get information 
about them. 

Q. Then, to summarize for a moment, is this the situation: 
That the list which the law requires to be filed in Albany alpha¬ 
betically was not recorded as an official list in so far as the recep¬ 
tion of the vote was concerned? A. Not at all. The inspectors 
took the ground that it was their business to go to the books of 
the company, the best ending of the matter. 

Mr. Mayer.— Billing No. 3. 

“ Proper opportunity will be afforded for the challenge of votes 
cast by voters whose names were not on said list before certifying 
the result of the canvass to the company.” 

Bailing No. 4. 

• “ Ballot voted by mail in envelopes not bearing the name of the 
policy-holder signed by himself are void.” 

Q. How did that question arise? A. The law states that the 
policy-holder must write his name upon the envelope by his own 
signature, I think it is. I don’t remember the wording of it, but it 
used the word “ must ” which we felt to be mandatory. It sub¬ 
stantially made the envelope a part,of the ballot, after declaring 
in the first place that a writing—the official ballot when signed 



Testimony of Me. Backus. 531 

and witnessed and so on, and other suitable writing, was a ballot, 
it goes on to then state that the policy-holder must write his name 
upon this writing and must do other things. 

Q. Was that subject a matter of discussion by counsel ? A. 
Oh, yes, sir. 

Mr. Mayer.— Ruling No. 5. 

kk Where the ballot is not signed by the policy-holder, or where 
it is not signed in the presence of a subscribing witness, or where 
the policy number is not stated in the ballot, the ballot is void.” 

Ruling No. 6. 

“A ballot, in order to be valid, must contain the correct number 
of the voter, and if voted by mail the policy number in the ballot 
and the policy number of the envelope must exactly correspond, 
otherwise the ballot is void.” 

Ruling No. 7. 

“ Section 94 of chapter 326 of the Laws of 1906 does not re¬ 
quire a ballot to contain the address of the policy-holder or the 
date of the execution of the ballot, and where the ballot does con- 
tain the address of the policy-holder and the date of the execution 
of the ballot, it is surplusage, and the ballot is valid whether the 
address or date or both were inserted by the policy-holder or any 
other person.” 

Q. Referring to Ruling No. 7, was that a subject-matter of dis¬ 
cussion likewise? A. Yes, sir. I don’t know whether they were 
in the briefs, but all those matters came up; I think they were, 
because we went over and took the briefs up point by point when 
we had the discussion; so I presume they were. 

Mr. Mayer.— Ruling No. 8. 

Cf The provisions of section 94 of chapter 326 cf the Laws of 
1906 requiring that a ballot voted by mail must be enclosed in a 
sealed envelope upon which must be written his signature in his- 
own handwriting and his post-office address and the number of at 
least one policy held by him, is mandatory, and that where the 
envelope is not sealed, or where the envelope is not endorsed as 
required by the statute, or where the signature on the envelope is 
not in the handwriting of the policy-holder, or where the name of 
the policy-holder on the envelope is lacking, or whdre the ad¬ 
dress is lacking or where his policy number is lacking, the ballot is 
void.” 

Ruling No. 9. 

“ Where a policy-holder has shown an intent to comply with the 



532 


Senate Judiciary Committee. 


law by endorsing bis name in his own handwriting on the en- 
velope, but the name does not exactly correspond with the name 
on tlie ballot, by reason of the omission of a middle initial or the 
substitution of an initial for the given name of the policy-holder, 
or any other like difference, the ballot is valid.” 

Ruling jST o. 10. 

“ Where a ballot and its envelope contain the correct number 
of the policy upon which the policy-holder has. voted, there is a 
compliance with the provisions of section 04 of chapter 326 of the 
Laws of 1906, without regard to when or by whom or in what 
manner the number was inserted.” 

Q. Row, referring to Ruling Ro. 10-A. The one you 

have just read ? 

Q. Yes — was that the subject of spirited debate and differ¬ 
ence? A. Yes, sir; the International Policy-holders 1 ’ Committee 
claimed that a great many numbers had been put on afterward 
and contended that they could see the difference between the 
handwriting and the number. We could not. 

Mr. Maver.— Ruling Ro. 11. 

“ Where a proxy is not signed by the policy-holder, or where 
it is not signed by the policy-holder in the presence of a sub¬ 
scribing witness, or where it does not contain the number of the 
policy, or where it is dated prior to the 18th day of October, 
1006, or where it, contains no date, or where the proxy has been 
revoked, or where the proxy has been mailed, the proxy and the 
ballot cast thereunder are void.” 

Ruling Ro. 12. 

“ Proxy-holders are required to exercise their powers by cast¬ 
ing their votes in person at the home office of the company on 
the day of election and proxies voted by mail are void.” 

Ruling Ro. 13. 

“ In all instances where a policy has been assigned to the com¬ 
pany the policy-holder is entitled to vote on the policy.” 

Ruling Ro. 14. 

u Where a policy has been assigned less than six months prior 
to the election, by an .assignment absolute on its face to an as¬ 
signee other than the company, the policy-holder is entitled to 
vote on such policy.” 

Ruling Ro. 15. 

“ Where a policy has been assigned more than six months 
prior to the election by an assignment absolute on its face to an 





Testimony of Mr. Backus. 


533 


assignee other than the company, and the signature of the as¬ 
signee either attested by the assignor -or acknowledged in like 
manner as in case of a deed to be recorded in this State, shall 
not have been filed at the home office of the company, then the 
policy-holder is entitled to vote on such policy.” 

Ruling No. 16. 

“ In order to entitle the assignee of a policy to vote thereon 
it is sufficient if his signature, attested by the assignor, or ac- 
knowledged in like manner as in case of a deed to be recorded 
in this State, was filed at the home office of the company at any 
time prior to the date of election.” 

Ruling No. 17. 

“ W here a person is a qualified holder of two or more policies 
in force, one or more of which was assigned by him more than six 
months prior to December 18, 1906, such policy-holder had the 
right to vote on the policy or policies unassigned, and that each 
of his assignees had the right to vote on the assigned policy held 
by him.” 

Ruling No. 18. 

kk Where a policy-holder has executed a ballot in accordance 
with the provisions of the statute and mailed or delivered the 
same to the home office of the company he has exhausted his rights 
and any subsequent ballot voted by him is void.” 

Q. Now, in reference to.ruling No. 18, just read, will you tell 
the Committee whether that was the subject-matter of consider¬ 
able discussion ? A. They all were, sir. 

Q. Were there many instances in which a ballot had been exe¬ 
cuted and ffiter another ballot appeared ? A. There was one case 
where one man voted eight times on the same policy number and 
a number of times where people voted twice .on the same policy 
number; and sometimes they voted the same ticket each time, and 
it was not on both sides, and. sometimes they voted for different 
tickets. 

Q. And was it by you held that the first vote exhausted the 
vote? A. That the voter had exhausted his right after casting 
his first ballot. The way we got at that was: the Superintendent 
of Insurance had placed his representative in the office of the 
Mutual Life and had received the ballots as they came in and had 
the insurance stamp placed on the envelope. 

Q. The date? A. The date; and we claimed that the mailed 
ballot was not completed until it had reached the company, and 


534 Senate Judiciary Committer; 

that created some little trouble between ourselves and the Inter¬ 
national Policy-holders’ Committee because of the ruling that 
theirs had been voted on the day of the election, they not having 
complied with sending them over to the company at that time. 

Mr. Mayer.—- Ruling Ho. 19. 

“ Where a policy-holder has executed a ballot in accordance 
with the provisions of the statute and has mailed or delivered it 
to a third party for subsequent delivery at the home office of the 
company and thereafter properly executes a ballot and mails or 
delivers the same direct to the home office of the company, the 
ballot which shall first arrive at the office of the company as shown 
by the stamp of the representative of the State Superintendent of 
Insurance is valid and all others are void.” 

Mr. Mayer.— How, the further five rulings, which were made 
on January 11, 1901. 

“ 1. In the opinion of this Board, the provision of section 94 
of chapter 326 of the Laws of 1906, that 1 one qualified voter 
designated by a majority of each three persons who shall have 
been appointed to receive proxies to be voted for tickets nominated 
as aforesaid may be present during the casting and the canvass of 
the votes ’ entitles such person so present to all the privileges of a 
watcher and challenger, including the right to make such- memo¬ 
randa in regard to such ballots challenged by him as he may deem 
necessary to protect the rights of the ticket which he represents. 

“ 2. This Board will prepare its challenge sheets in duplicate 
or with as many copies as may be necessary and copies of such 
challenge sheets will be given to each person designated by the 
various proxy committees to be present at the canvass of the bal¬ 
lots in the'interest of their respective tickets, for the purpose of 
expediting the canvass.” 

Mr. Backus dissents from the second ruling of the Board, on 
the ground that the Board should not give official copies of their 
challenge sheets to anyone. 

u 3. The challenge sheets mentioned in ruling number two shall 
not indicate the ticket or names of the candidates voted for by any 
policy-holder. 

“ 4. All challenges relating to the validity of a ballot, including 
challenges on the ground that the signature on the envelope or bal¬ 
lot is not the signature of the voter (except that another ballot has 
been voted on the same policy, or that the voter has voted on other 



Testimony of Me. Backus. 


535 


policies, or that the voter is not qualified, or that the voter’s name 
is not on the Albany list, or is incorrect thereon) will be enter¬ 
tained by the inspectors at the time the- ballot is first ottered for 
examination by the watchers and not afterwards. 

u 5. Where a policy-holder is the owner of two or more policies 
and the number of one of such policies is inserted in his ballot and 
the number of another of such policies is written on the envelope 
containing such ballot, the ballot is valid.” 

Mr. Mayer.— Now, the two rulings made upon January 14, 
1907: 

“ 1- When a ballot has been challenged on the ground that the 
signature on the envelope does not correspond with the signature 
on the ballot, such challenge must be passed on by one of the in¬ 
spectors, who, upon the request of any watcher, will submit his 
ruling to a majority of the Board, whose decision shall be final. 

“ 2. Where the envelope enclosing the ballot has endorsed 
thereon a street address alone, or the name of a place, even though 
the name of the state or country be omitted, the ballot is valid.” 

Mr. Mayer.— I offer in evidence those rulings. 

(Marked Exhibit No. 141 and is as follows:) 

RULINGS OF THE BOARD OF INSPECTORS OF ELEC¬ 
TION FOR TRUSTEES OF THE MUTUAL LIFE IN¬ 
SURANCE COMPANY OF NEW YORK, GOVERNING 
THE CANVASS OF BALLOTS CAST AS OF DECEM¬ 
BER 18, 1906. 

1. The Board will canvass all ballots including the so-called 
Peabody and Olney ballots which are prima facie valid and ap¬ 
pear to have been lawfully cast, subject to verification and ascer¬ 
tainment by the Board of the validity thereof and of the quali¬ 
fications of the voters by the books and records of the company. 

The Board does not deem it necessary to decide at the present 
time what is the nature or extent of its powers, but reserves de¬ 
cision as to its rights of further verification and ascertainment 
in respect to grounds of challenge not appearing on the face of the 
ballots. 

2. It is not necessary for a policy-holder’s name to appear upon 
the official lists filed in pursuance of the provisions of section 
94 of chapter 326 of the Laws of 1906, in order to entitle him 
to vote at the recent election. 


536 


Senate Judiciary Committee. 


3. Proper opportunity will be afforded for the challenge of 
votes cast by voters whose names were not on said list before 
certifying the result of the canvass to the company. 

4. Ballots voted by mail in envelopes not bearing the name of 
the policy-holder signed by himself are void. 

5. Where the ballot is not signed by the policy-holder or where 
it is not signed in the presence of a subscribing witness, or where 
the policy number is not stated in the ballot, the ballot is void. 

6. A ballot, in order to be valid, must contain the correct 
policy number of the voter and if voted by mail the policy num¬ 
ber in the ballot and the policy number of the envelope must 
exactly correspond, otherwise the ballot is void. 

7. Section 94 of chapter 326 of the Laws of 1906, does not re¬ 
quire a ballot to contain the address of the policy-holder or the 
date of the execution of the ballot and where the ballot does 
contain the address of the policy-holder and the date of the, exe¬ 
cution of the ballot, it is surplusage, and the ballot is valid, 
whether the address or date or both were inserted by the policy¬ 
holder or any other person. 

8. The provisions of section 94 of chapter 326 of the Laws 
of 1906 requiring that a ballot voted by mail must be enclosed 
in a sealed envelope, upon which must be written his signature 
in his own handwriting, and his post-office address, and the num¬ 
ber of at least one policy held by him, is mandatory, and that 
where the envelope is not sealed or where the envelope is not 
endorsed as required by the statute, or where the signature on 
the envelope is not in the handwriting of the policy-holder or 
where the name of the policy-holder on the envelope is lacking, 
or where the address is lacking, or where his policy number is 
lacking, the ballot is void. 

9. Where a policy-holder has shown an intent to comply with 
the law by endorsing his name in his own handwriting on the 
envelope, but the name does not exactly correspond with the 
name.on the ballot, by reason of the omission of a middle initial, 
or the substitution of an initial for the given name of the policy¬ 
holder or any other like difference, the ballot is valid. 

10. Where a ballot and its envelope contain the correct num¬ 
ber of the policy upon which the policy-holder has voted, there 
is a compliance with the provisions of section 94 of chapter 326 
of the Laws of 1906, without regard to when or by whom or in 
what manner the number was inserted. 


Testimony of Mr. Backus. 


537 


11. TV here a proxy is not signed by the policy-holder or where 
it is not signed by the policy-holder in the presence of a sub¬ 
scribing witness, or where it does not contain the number of the 
policy, or where it is dated prior to the eighteenth day of October, 
1900, or where it contains no 1 date, or where the proxy has been 
revoked, or where the proxy has been mailed, the proxy and the 
ballot cast thereunder are void. 

T2. Proxy-holders are required to exercise their powers by 
casting their votes in person at the home office of the company 
on the day of election and proxies voted by mail are void. 

13. In all instances where a policy has been assigned to the 
company, the policy-holder is entitled to vote on the policy. 

14. Where a policy has been assigned less than six months 
prior to the election by an assignment absolute on its face to an 

. assignee other than the company the policy-holder is entitled to 
vote on such policy. 

15. Where a policy has been assigned more than six months 
prior to the election by an assignment absolute on its face, to an 
assignee other than the company, and the signature of the assignee 
either attested by the assignor or acknowledged in like manner as 
in case of a deed to be recorded in this State shall not have been 
filed at the home office of the company, then the policy-holder is 
entitled to vote on such policy. 

16. In order to entitle the assignee of a policy to vote thereon, 
it is sufficient if his signature, attested by the assignor or ac¬ 
knowledged in like manner as in case of a deed to be recorded in 
this State, was filed at the home office of the company at any time 
prior to the date of election. 

17. Where a person is a qualified holder of two or more policies 
in force, one or more of which was assigned by him more than six 
months prior to December 18, 1906, such policy-holder had the 
right to vote on the policy or policies unassigned, and that each 
of his assignees had the right to vote on the assigned policy held 
by him. 

18. Where a policy-holder has executed a ballot in accordance 
with the provisions of the statute, and mailed or delivered the 
same to the home office of the company, he has exhausted his 
rights and any subsequent ballot voted by him is void. 

19. Where a policy-holder has executed a ballot in accordance 
with the provisions of the statute and has mailed or delivered it 
to a third party for subsequent delivery at the home office of the 


533 


Senate Judiciary Committee. 


company, and thereafter properly executes a ballot and mails or 
delivers the same direct to the home office of the company the 
ballot which shall first arrive at the home office of the company 
as shown by the stamp of the representative of the State Super¬ 
intendent of Insurance is valid and all others are void. 

By order of the Board of Inspectors. 

Dated January 9, 1907. 

ALEX. RICE McKIM, 

J. BAYARD BACKUS, 

GEORGE S. LUDLOW, 

JOSEPH A. ARNOLD, 

MELVIN H. DALBERG, 

Inspectors. 


FURTHER RULINGS OF THE BOARD OF INSPECTORS 
OF ELECTION FOR TRUSTEES OF THE MUTUAL 
LIFE INSURANCE COMPANY OF NEW YORK, GOV¬ 
ERNING THE CANVASS OF BALLOTS CAST AS OF 
DECEMBER 18, 1906. 

1. In the opinion of this Board, the provision of section 94 of 
chajrter 326 of the Laws of 1906, that “ One qualified voter desig¬ 
nated by a majority of each three persons who shall have been ap¬ 
pointed to receive proxies to be voted for tickets nominated as 
aforesaid may be present during the casting and the canvass of 
the votes ” entitled such person so present to all the privileges of 
.a watcher arid challenger, including the light to make such mem¬ 
oranda in regard to such ballots challenged by him as he may 
deem necessary to protect the rights of the ticket which he repi-e- 
sents. 

2. Th is Board will prepare its challenge sheets in duplicate or 
with as many copies as may be necessary and copies of such chal¬ 
lenge sheets will be given to each person designated by the various 
proxy committees to be present at the canvass of the ballots in the 
interest of their respective tickets, for the purpose of expediting 
the canvass. 

Mr. Backus dissents from the second ruling of the Board, on 
the ground that the Board should not give official copies of their 
challenge sheets to anyone. 



Testimony of Mr. Backus. 


539 


3. The challenge sheets mentioned in Ruling No. 2 shall not 

indicate the ticket or names of the candidates voted for by any 
policy-holder. # 

4. All challenges relating to the validity of a ballot, including 
challenges on the ground that the signature on the envelope or 
ballot is not the signature of the voter (except that another ballot 
has been voted on the same policy, or that the voter has voted on 
other policies, or that the voter is not qualified, or that the voter’s 
name ,is not on the Albany list, or is incorrect thereon) will be 
entertained by the inspectors at the time the ballot is first offered 
for examination by the watchers and not afterward. 

5. Where a policy-holder is the owner of two or more policies 
and the number of one of such policies is inserted in his ballot 
and the number of another of such policies is written on the enve¬ 
lope containing such ballot, the ballot is valid. 

By the order of the Board of Inspectors. 

Dated, January 11, 1907. 

ALEX. BICE McKIM, 

, J. BAYARD BACKUS, 

MELVIN IT. DALBERG, 
JOSEPH A. ARNOLD, 

GEORGE S. LUDLOW, 

Inspectors. 


FURTHER RULINGS OF THE BOARD OF INSPECTORS 
OE ELECTION FOR TRUSTEES OF THE MUTUAL 
LIFE INSURANCE COMPANY OF NEW YORK, GOV¬ 
ERNING THE CANVASS OF BALLOTS CAST AS OF 
DECEMBER 18, 1906. 


1. When a ballot has been challenged on the ground that the 
signature on the envelope does not correspond with the signatuie 
on the ballot, such challenge must be passed on by one of the 
inspectors, who, upon the request of an\ watchei, vill submit his 
ruling to a majority of the Board, whose decision, shall be final. 

2. Where the envelope enclosing the ballot has endorsed 
thereon a street address alone, or the name of a place, even though 



540 Senate Judiciary Committee. 

tlie name of the State or country be omitted, that the ballot is 
valid. 

By order of the Board of Inspectors. 

Dated, January 14, 1907. 

ALEX. RICE McKLM, 

JOSEPH A. ARNOLD, 

' J. BAYARD BACKUS, 

MELVIX H. DALBERG, 
GEORGE S. LUDLOW, 

Inspectors. 


Q. Now, Mr. Backus, will you describe to the Committee the 
steps and the various processes which you found necessary in work¬ 
ing at this problem of counting these ballots? A. We have six 
processes which we have gone through in the canvass of this vote. 
The first two would have been put together if it had net been for 
the fact that we were waiting for counsel to appear before us, so 
that we thought we would not waste time, but .went on and opened 
the envelopes. The first was the opening, which I commenced to 
describe once before — the opening of the ballots and the stapling 
of the envelope and the ballot together, the writing of these cards 
and the numbering of the envelope and the ballot to correspond 
with the serial number of these cards. 

Xow, we had four colors of cards, simply for our own con¬ 
venience. On the yellow cards we placed all ballots which were 
received by the 'Company by mail or delivered; the blue cards, 
those which were sent over to us by the International Committee; 
the chocolate colored cards represented proxies, and the white 
cards those voted on the day of the election. This helped us some 
in classifying. Those are the cards (producing cards). 

Q. Will you state for convenience where your serial number of 
these cards commenced? A. They began at Xo. 1 on the vellow 

* V 

cards, Xo. 300,000 on the blue cards, Xo. 500,000 on the chocolate 
cards, and Xo. 600,000 on the white. 

Q. Xow go on from that point, Mr. Backus. A. After these 
envelopes and ballots were stapled together and numbered and 
the cards written they were placed in pasteboard boxes holding 
500 each, so that we could get at them at any moment. The 
second step was the general challenge of the ballots, and at the 
request of the International Policy-holders’ Committee we had 



Testimony of Mr. Backus. 


541 


one girl writing all the witnesses’ names on the cards, so it would 
appear upon the challenge-sheet. Next to that girl was a girl 
who checked the objections to the ballot which the Board had 
ruled upon — put the Board's rulings on the ballot. I should 
say, in the first place, if you will permit me, there were forty- 
one, I think, grounds of challenge to those ballots — to the en¬ 
velope, to the proxy or to the ballot, and I would offer those to 
you. You asked for those. 

Q. I will get at those in a moment. A. After the girl who 
acted for the inspectors had placed the numbers representing 
the defects in the ballots oil the cards each individual ballot was 
passed to a watcher for the opposition party, who looked at the 
ballot and made any challenges he desired, which were also placed 
on the cards. Now, the inspectors — of course', in the case of 
not being witnessed or not being signed, or the policy number 
not being on a ballot, it was voided at once, because that was a 
serious defect. If our No. 1 referred to the signature not being 
similar on the envelope as it was on the ballot, if a watcher 
challenged the fact that the signature was not the same, it was 
at once submitted to an inspector who decided whether in the 
opinion of an ordinary business man, not as an expert, it was 
not the same or was the same, why it was so recorded but the 
challenge went on; if the inspector said it was not the same, 
it was voided; and if the inspector’s decision was questioned it 
was submitted at once to a majority of the Board. The whole 
number of ballots was gone over in this matter. As soon as that 
was done the accountants took up the work and got their tally- 
sheet and counted the vote, having watchers present while they 
were counting it, and I have brought with me here — I do not 
think it will be very easy in language to explain these sheets and 
other things — what we have been using. 

Q. Just before you referred to the challenge^sheets — A. 

’ Shall I go through the different processes from the first and show 
the six steps? 

Q. Yes. Pardon, did you state the number of girls employed? 
A. No. There were a hundred girls employed in opening the 
envelopes and fifty employed in the general challenge, the second 
set. 

Q. From what dates? A. From January 5th to February 13th, 
twenty-five working days. 





542 


Senate Judiciary Committee. 


Q. Now then ( A. The next step was to nuinericalize the cards 
in order that we could compare with the books of the company, 
it being the only way we could do it. There were 271,790 cards 
then to be compared; we had already voided some 28,000 ballots. 

Q. You had held these ballots void2 A. Yes, as not complying 
with the law. Then, the numericalizing of the cards took from 
February 14th to the 25th, ten working days, and we had sixty 
girls employed. The' fourth step was to compare with the books 
of the company. W e had their registers brought up and then* 
actuaries’ ledgers. One girl would have the actuary’s ledger and 
one girl would have the general policy register and another girl 
would record on the cards the result. Now, in order to be sure 
that our work was accurate, as there were questions raised ar 
every point of it, when a card showed that the name and number 
did not agree with that on the book of the company we immedi¬ 
ately sent for the ballot and compared it to see that tlie number 
was correct; there might have been an error of some kind; we did 
mot want any errors. So that we had all the ballots out and 
voided that did not agree with the bo-oks at that period. The 
actuaries’ books showed whether or not the policy was in force, 
whether it had been forfeited or death had .occurred or anything 
of that kind. Now, a great deal has been said about the fact that 
dead men voted. There may have some voted; I don’t know it. 
But the books of the company might show a policy number dead 
and we marked it dead on our records because it was not the 
right number of the man. There was just one case where it was 
wrong, and the company sent us word that their books were 
incorrect, and we had a written letter to that effect. So that the 
deaths were few of that kind. There were men died after they 
voted, naturally. 

Then the next thing was the alphabetizing of the cards in order 
to get eliminated the duplicates of voting upon more than one 
policy, because we had to bring the names together, and in order 
to make that work accurate while we were comparing with the 
books we put the man’s date of birth on the card so that if a 
number of similar names came together they were not apt to be 
all born on the same day. We have about completed this work 
of alphabetizing; I think we will complete that to-morrow. I do 
not imagine that there will be much work to do in eliminating the 
duplicates, and then all we have to do after that is to have our 


543 


Testimony of Mr. Backus. 

accountants deduct the void from the previous amount and certify 
the result to the company. 

Q. You say you do not think there will be much work in elimi¬ 
nating the duplicates. Idas the process thus far eliminated du¬ 
plicates ? A. Well, they have eliminated duplicates thus far of 
the same policy number, but now I am speaking of the last process. 
It is to eliminate where a man has ten policies and votes on all of 
them. I do not see where he is going to get his ballots, because 
they seem to have used them up by the first process, and we haven’t 
struck many. 

Q. Roughly estimated, within what time do you think your 
work will be completed? A. We certainly will complete within 
two weeks, and I think sooner. I couldn’t say until I find out 
what this last process involves. 

Q. How many tickets were there in the Mutual election? A. 
Three. 

Q. I hand you this paper, which for convenience I will call the 
challenge key and will ask you to not read the various details, but 
to just state to the Committee what that paper is and its necessity ? 
A. That is our key to the objections which all parties could raise 
to the envelope, the proxy and ballot. There are forty-one on 
the general challenge; there are more than that to the duplica¬ 
tions, you know. 

(The colored cards before referred to were marked Exhibits 142, 
143, 144, 145 and are as follows:) 

EXHIBIT Ho. 142. 

Name. Policy Humber 


State or Country 

Commencing with 

Serial Ho. 1. 

' 0. 

K. on List. 

Incorrect on List. 

Hot on List. 

• 

H 

ENVELOPE 

PROXY 

ACTION 


Unsealed 

Hot Autographic 

’Challenged by 


Hone 

Ho Hate 

Rejected 


Hot Autographic 

Ho Policy Humber 

Accepted 

in 

Ho Hame 

Ho Witness 

A 

o 

Ho Address 

Prior to 10/18/0G 

U 

A 

Ho Policy Humber 

Revoked / /06 

E 

A 

Otherwise Irregular 

Mailed 

S 


544 Senate Judiciary ( 'ommittee. 


ee 

Assign 

or 

Not Signed 
No Witness 
No Date 

No Policy Number 


Ballot. 

ee 

Name of Assign 

or 

Date Signed 
Assignment Filed 
Expired 

Other Policy Nos. 

t/ 


Name 

State or Country 


EXHIBIT No. 143. 

Policy Number 
Commencing with 

Serial No. 600,000. 


O. K. on List. 


Incorrect on List. 


Not on List 


ENVELOPE 

^ Unsealed 
§ None 

pq Not Autographic 
^ No Name 
O No Address 
^ No Policy Number 
pq Otherwise Irregular 


PROXY 

Not Autographic 
No Date 

No Policy Number 
No Witness 
Prior to 10/18/06 
Revoked / /06 

Mailed 


ACTION 

Challenged by 
Rejected 
Accepted 


ee 

Assign Voting 
or 

Not Signed 
No Witness 
No Date 

No Policy Number 


Ballot. 


ee 

Name of Assign 

or 

Date Assigned 
Assignment Filed 
Expired 

Other Policy Nos. 


G-26 

Name. 

State or Country. 


EXHIBIT No. 144. 

Policy Number. 
Commencing with 

Serial No. 500,000. 

% 




0G kj <3 




ENDORSEMENT. 


Testimony of Mr. Backus. 


545 


G. K. on List. 

ENVELOPE. 


ee 

Assign Voting 
or 


Incorrect on List. 


PROXY. 


Not on List. 


ACTION. 

Challenged by 
Rejected. 
Accepted. 

A 

U 

F 

S 


Ballot. 


ee 

Name of Assign 

or 

Date Assigned 
Assignment Filed 
Expired 

Other Policy Nos. 


GU27 

Name. 

State or Country. 
O. K. on List. 


EXHIBIT NO. 145. 

% 

Policy Number. 

Commencing with 

Serial No. 300,000. 

Incorrect on List. Not on List. 


ENVELOPE 

Unsealed 

None 

Not Autographic 

No Name 

No Address 

No Policy Number 
«/ 

Otherwise Irregular 
18 


PROXY 

Not Autographic 
No Date 

No Policy Number 
No Witness 
Prior to 10/18/06 
Revoked / /06 


ACTION 

Challenged by 

Rejected. 

Accepted. 

A 

U 

F 

S 



Senate Judiciary Committee. 


546 


ee 

Assign Voting 
or 

Not Signed 
No Witness 
No Date 

No Policy Holder 


Ballot. 


ee 

Name of Assign 

or 

Date Assigned 
Assignment Filed 
Expired 

Other Policy Nos. 


Q. This paper which I am about to introduce in evidence, there 

are apparently in it -- A. They are not all consecutive numbers. 

You could not tell by the numbers, you will have to count them. 

Q. There are a certain number of grounds of challenge which 
are designated by numbers, one, two, three and the like. Now, if 
a watcher challenged, how was the challenge made? A. It was 
noted by number in that vacant space on the card. 

Q. Now, will you take the white card, which is Exhibit 143, 
and just note where the challenge was placed? A. If I mark it 
“ 72,” that would be void of duplicate, and the void stamp would 
be inserted down in the corner spot there. 

Q. If on Exhibit No. 143, for illustration, the number “72 ” 
with a circle about it was written, reference then would be had 
to challenge 72; is that right? A. That is right. 

Q. And then the challenge would be the duplicate vote? A. 
Exactly, and the vote that was voted first would be counted, and 
the mark put on the other vote — the one that was voided. 

Q. And was the same system adopted with reference to all of 
the challenges ? A. Exactly. Of course, a great many of the 
challenges we had ruled against, you know. The International 
Policy-holders wished us to preserve all their rights, and we did 
so in order that if recourse were had to the courts we could de¬ 
liver them in a very short time. 

Q. In other words, does each card of the character of those in¬ 
troduced in evidence to-day, being exhibits 142, 143, 144 and 145, 
show upon its face the ground of challenge? A. It does. 

Q. That is, I mean the number? A. Some cards have a whole 
lot of them on. 

Q. And this card, by reference to the key, can be translated into 
the language? A. It can. 




Testimony of Mr. Backus. 


547 


Q. Therefore, should any questions be presented to the courts 
of law your system will show precisely what objection, if any, was 
made to the ballot ? A. Yes, sir, and there is our challenge sheet 
which shows all objections right down here, so that an accountant 
in two days could give the total number of any one objection on 
the whole number of ballots and we could go and get the ballots 
out in a very short time. 

Mr. Mayer.— Now, I will just read a few of these grounds of 
challenge to the Committee, and I would ask the Committee when 
this paper is passed around, if the members would be good enough 
to run through these various grounds so as to see the great number 
which were presented by either one side or the other. 

The first subdivision is “Envelope.” Under that are the fol¬ 
lowing headings: 

1. Not autographic. 

2. No date. 

3. No name endorsed. 

4. No policy number. 

5. No address. 

7. Incomplete address. 

8. Policy number changed after signature. 

10. Address not autographic. 

11. Unsealed. 

12. Policy number different from ballot. 

13. No. envelope. 

14. Sealed at end. 

• / 

The second subdivision is “ Proxy,” and a list of grounds ap¬ 
pear there, such as “ Not autographic,” “ No date,” “ Not signed,” 
“ No policy No.” and other details which I need not read, except¬ 
ing one or two, which will illustrate, such as “ Policy terminated 
prior to December 18, 1906.” 

Q. I will ask you one question for explanation, referring to 
challenge No. 76, which reads “Policy No. over 1,665,933.” 
"What does that mean? A. It means that that was the last num¬ 
ber written on the 27th of April, 1906, and the Board held that 
the provision of the law — the law provided that any conti ac t 
I want to get that language — “ Every such policy-holder and 
every other person having a right to vote by virtue of any contract 



548 


Senate Judiciary Committee. 


made prior to the enactment of this section." This wa§ enacted on 
the 27th of April, and the by-laws of the company provide that 
any policy-holder who shall have a policy of a thousand dollars or 
more shall have a right to vote, and the Board held that that 
meant that the law referred to policies under $1,000, because 
people having them had the prior right by the by-laws of the 
company. 

Mr. Mayer.— I offer in evidence the key to' the challenges. 
(Marked Exhibit No. 146 and reads as follows:) 

EXHIBIT No. 146. 

KEY to the numbers used, during the general challenge of bal¬ 
lets, to designate on cards special objections made to envelopes, 
proxies and ballots. 

Envelope. 

1. Not autographic. 

2. No date. 

3. No name indorsed. 

4. No policy number. 

5. No address. 

7. Incomplete address. 

8. Policy number changed after signature. 

10. Address not autographic. 

11. Ensealed. 

12. Policy number different from ballot. 

T3. No envelope. 

14. Sealed at end. 

Proxy. 

21. Not autographic. 

22. No date. < 

23. Not signed. * r ! 

24. No policy number. 

25. No address. 

26. No witness. 

27. Incomplete address. 

28. Policy number changed after signature. 

31. Prior to 10-18-06. 

32. Mailed. 


I 


Testimony of Mr. Backus. 


549 


33. Revoked. 

• 34. No proxy. 

35. Proxy-holder name changed. 

36. Name inserted after signature. 

37. Already voted. 

Ballot. 

41. Not autographic. * 

42. No date. 

43. Not signed. 

44. No policy number. 

45. No address. 

46. No witness. 

47. Incomplete address. 

48. Policy number changed after signature. 

49. Signature same. 

51. Already voted. 

52. More than thirty-six candidates. 

53. No ballot. 

Attested signature not filed. 

KEY to numbers used, while comparing with books of the 
company, to designate on cards special objections made as to the 
voter’s right to vote. 

71. Neither name or policy number on general register. (Vote 

not to be voided, but ballot or proxy to be gotten out and 
compared with card to see that name and number on card 
agrees with the name and number on the ballot or proxy.) 

72. Duplicate vote. 

73. Policy terminated prior to December 18, 1906. 

74. Assignee’s signature not filed. 

75. Not voted by policy-holder. 

76. Policy number over 1,665,933. 

77. Policies of less than $1,000, issued after December 18, 1905. 

78. Voting on more than one policy. 


550 


Senate Judiciary Committee. 


Q. Referring to the key of the numbers are there instances in 
which the successive order of numbers is skipped ? A. Yes. 

Q. State why that was done ? A. It is not done in every case, 
but the even number here would correspond with the same num¬ 
ber over on the other — twenty, or something of that kind. It was 
for helping the memory of the parties interested. 

Q. Yow will you be kind enough to explain to this Committee 
as best you can in language, and then these documents will be 
presented to the Committee, the matter of the challenge sheets and 
the tally sheets and the various sheets necessary? A. I do not 
believe I can see these very well, because my eyes are very poor. 
This first is the tally sheet on which the accountants kept the tally 
as they counted the cards. They had, at the same time they were 
counting, as I said before, watchers of the various parties present, 
w r ho saw that they were doing their work correctly. That is the 
summary of the vote which we gave out at the end of the general 
challenge of the individual ballots; that was absolutely correct, 
subject simply to the elimination of duplicates or policies lapsed 
or surrendered or deaths or anything of that kind. 

This is the challenge sheet of the individual name, the vote re¬ 
ceived by each candidate. 

This is the order of the poll. Cyrus Curtis got the highest 
number of votes. That is simply down to the end of the first 
challenge sheet, and the deductions have to be made from the ones 
that voted before. We voided 28,000 approximately on the first 
process, 20,000 of these, and I don’t know how many we will void 
on this last process. That is the deduction sheet which they will 
make now, that they are working on now — deducting those bal¬ 
lots, and that is the challenge sheet, copies of which were given to 
each ticket. Yow, those challenge sheets, there were as many as 
that anyhow, I think (indicating). 

Q. That is, two or three feet thick? A. Well, I cannot judge 
it that way. There were several though. 

Q. Were there split tickets? A. Yes, sir. 

Q. Describe the tickets. A. Yes, sir. You will notice on there, 
for instance, we call one vote on there the Dexter-Peabody, and 
We called it that — we treated it as a scratch and not as a split, 
because in most cases the name of Mr. Dexter w T as inserted and 
the name of Mr. Twombley crossed out. It was simpler for us 
to do that. There were about 46,000 of those. But where any 



MUTUAL LIFE INSURANCE COMPANY. 

Election of Trustees. 

TALLY SHEET. 



Serial 

No. 




Agreed 


Date. 

Kind. 

Tallied by 

Checked by 

with 

Challenge 

Sheet. 

Total 

number. 


No Objections—Straight. 


Peabody. 


Dexter 

Peabody. 


Adminis¬ 

tration. 


United. 


Fusion. 


No Objections—Split. 


Peabodt. 


Number I Trustees 
of votes, i voted for. 


Administration. 


Number I Trustees 
of votes. ! voted for. 


United. 


Fusion. 


Number 1 Trustees Number j Trustees 
of votes. ‘ voted for. of votes.' voted for. 


Objected to—Straight. 


Peabody. 


Dexter Adminis- 
Peabody. tration. 


United. , Fusion. 


Objected to—Split. 


Peabodt Administration United Fusion. 


Number 

| Trustees 

Number 

j Trustees 

Votes 

of votes. 

voted for. 

of votes. 

voted for. 

rejected. 





































































































Testj iony of Mn. Backus. 


551 


other man’s name than Mr. Twombley’s had been crossed out for 
Mr. Dexter’s we had to treat it as a split. 

Q. I will read then just briefly to relieve your eyes, Mr. Backus, 
and then pass it around: u Ballots were placed in boxes with the 
cards in packages of 500 and were handed over to the tellers for 
tallying purposes from the tables supervised by the inspectors who 
had passed upon the validity of the votes. The cards were taken 
from the boxes by the tellers and sorted into their proper classi¬ 
fication.” 

This is for the purpose of showing the Committee the enormous 
detail involved. 

Q. I will read this off. See if I get the names correctly, Mr. 
Backus. Have you produced here the blank used by the inspectors, 
known as the table record ? A. Yes, sir; that was used during the 
general challenge of individual ballots. 

Q. What was that ? A. It was to show what inspector was en¬ 
gaged or the special crew that was working on it, who the watchers 
were and who the people were who were acting for the inspectors. 

Q. Was it the purpose of the table record to keep a complete 
record of the persons present and the time when present and when 
challenges were made? A. Yes, for our own benefit. That was 
not supposed to be for outside purposes whatever. 

Q. This other paper is the tally sheet ? A. The tally sheet, the 
general tally sheet, similar to other tally sheets. 

Q. It has a number of headings which will appear when it is 
transcribed, but I desire to ask you what the heading “ Date ” is ? 
A. The date which they were counted. 

Q. “ Serial number” ? A. That is the serial number on the 
card — 500; 1 to 500, 500 to 1,000, and so forth. 

Q. “ The kind ” ? A. Well, Peabody splits, or whatever they 
were. 

Q. That is the- A. It is the character of the ballot. 

Q. The group ? A. Yes, w T e had those ballots all sorted as far 
as we could. There were some mixed in trying to keep the groups 
together. 

Q. The summary of votes cast for individual trustees — the de¬ 
ductions are in colored ink, are they not? A. Those are the 
scratches, are they not ? 

Q. The scratches? A. Yes. Those are where split ballots 


came in. 



552 


Senate Judiciary Committee. 


Q. Now, “ the order of polldoes that mean the number or the 
standing of each'candidate? A. It means the highest number of 
votes. No. 1 is the highest number of votes, No. 2 the next, and 
so on. 

Q. So that Cyrus Curtis, as you said before, is the person 
having received the highest number of votes on the administration 
ticket ? A. Yes; and the last column there shows the total vote 
that each party received. 

(Paper offered in evidence by Mr. Mayer and marked Exhibit 
148, Exhibit 148-A, Exhibit 148-B, Exhibit 148-C, Exhibit 148-D, 
Exhibit 148-E, Exhibit 148-F, Exhibit 148-G, as follows:) 


MUTUAL LIFE INSURANCE COMPANY. 


Testimony of Mr. Backus. 


553 


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MUTUAL LIFE INSURANCE COMPANY OF NEW YORK. 

Election of Trustees. 

Summary of Votes Cast for Individual Trustees. 


554 


Senate Judiciary Committee. 




























































































































































Testimony of Me. Backus. 


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MUTUAL LIFE INSURANCE COMPANY. 

Election op Trustees. 


Senate Judiciary Committee 



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CHALLENGE SHEET. 


Testimony of Mr. Backus 


559 


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560 


Senate Judiciary Committee. 


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Testimony of Mr. Backus. 


561 


MUTUAL LIFE INSURANCE COMPANY. 

Memorandum on Counting Votes at Election of Trustees. 

The following method was carried into effect in tallying the 
votes. Ballots were placed in boxes with the cards in packages of 
500 and were handed over to the tellers for tallying purposes from 
the tables supervised by the inspectors who had passed upon the 
validity of the votes. The cards were taken from the boxes by 
the tellers and sorted into their proper classification, enumerated 
as^ follows: 

(1) Administration. 

(a) Peabody straight votes with no special objection. 

(b) Peabody straight votes with special objections. 

(c) Peabody split votes with no special objections. 

(d) Peabody split votes with special objections. 

(e) Regular straight votes with no special objections. 

(f) Regular straight votes with special objections. 

(g) Regular split votes with no special objections. 

(h) Regular split votes with special objections. 

(2) United: 

(a) Straight votes with no special objections. 

(b) Straight votes with special objections. 

(c) Split votes with no special objections. . 

(d) Split votes with special objections. 

(3) Fusion: 

(a) Straight votes with no special objections. 

(b) Straight votes with special objections. 

(c) Split votes with no special objections. 

(4) Rejected votes. 

The cards were sorted in numerical order under these different 
classifications; likewise the ballots; with the exception of the 
straight and rejected votes. The tallying of the votes presided 
over bv a representative of Price, V aterhouse & Company was 
also represented by a watcher of each party in order to present a 
more independent conduct in the canvassing of the votes. The 
tallying of the split ticket was dealt with as follows: 

All the split, ballots, having been separated from the total, were 
tallied on a separate split ballot tallying sheet provided for the 
purpose, the difference between the scratches and substitutes being 
the number of trustees eliminated. 

In tall vino 1 the cards great care was taken to see that each box • 
contained its allotted number of votes. A summary sheet was 


562 


Senate Judiciary Committee. 


made of the tally sheets at the conclusion of the count, showing 
the number of votes cast under each heading; also the number of 
votes cast and the nature of the votes, namely: 

Total votes mailed. 

Total votes delivered. 

Total proxies. 

The challenged votes were recorded on challenge sheets printed 
for the purpose, on which was recorded the following informa¬ 
tion: 

Serial number. 

Policy number. 

Name and address of the policy-holder. 

Name of witness. 

Challenging party. 

Nature of the objection. 

Party challenged. 

In the column marked “ Nature of Objection/’ the number of 
objection was inserted. 

Each tally sheet was initialled by the two or more persons tally¬ 
ing and also by the person who checked same and a column was 
also provided on the tally sheet for the initials of the person 
checking the challenge sheets as they were completed. 

At the conclusion of the count a summary of the total votes cast 
and a summary of votes cast for individual trustees was prepared 
and delivered to the Board of Inspectors; the first summary show¬ 
ing the total number of votes cast for each party divided into 
straight and split votes with no special objections and with special 
objections. In the latter summary was given the number of 
votes cast for each individual on each ticket divided into no 
special objections and special objections. 

The inspectors having completed the work of comparing with 
the books of the company the ballots voided during the work were 
turned over to the accountants to be counted and deducted from 
the totals of the previous count. This work is now in progress, 
and when the duplications of policy-holders voting on more than 
one policy shall also have been deducted the count of the votes 
will be completed. 

The following blank forms of tally sheets, etc., are those being 
used on this work: 

(1) Tally sheet. 

(2) Cancellation sheet. 

(3) Summary sheet. 


Testimony of Mr. Backus. 


563 


MUTUAL LIFE INSURANCE COMPANY. 

Election of Trustees — Summary of Votes Cast. 
(Compiled by Price, Waterhouse & Company.) 


February 15, 1907. 

Total votes cast'.. 300,654 

Deduct — Ballots declared void. 28,864 

Net votes cast. ..,..271,790 

Summary. 


Summary. 


Administration : 

it t No special 
jjSa objections 

Special 

objections. 


Regular. 

.... 18,576 

19,487 


Regular splits. 

.... 1,431 

389 


Peabody. 

.... 80,933 

34,525 


Peabody splits . 

_ 31,559 

12,282 



132,499 

66,683 

199,182 

United: 

Regular. 

. 30,702 

• 36,924 


Regular splits. 

.... 898 

637 

/ 

• 

31,600 

37,561 

69,161 

Fusion : 

Regular.. . 

.... 2,484 

478 


Regular splits. 

.... 332 

153 



2,816 

631 

3,447 


271,790 


Votes for Individual Trustees. 

271,790x36 . 9,784,440 

Deduct names scratched for which no sub¬ 
stitutions were made. 4,105 


Net total votes for individual trustees: 

Sheet 1 attached. 7,172,380 

Sheet 2 attached. 2,607,955 

. - 9,780,335 


i 






























564 


Senate Judiciary Committee. 


Subject to future adjustment as to elimination of duplicates or 
of policies terminated for any cause prior to December 18, 1906. 

Q. Can you readily get a ballot if one should be needed by the 
court for any purpose ? A. In a very short time. 

' Q. Will you sav how short a time ? A. A fraction of a minute. 
I got one in less than thirty seconds. 

Q. How, from your experience will you give the Committee 
your opinion as to whether it would have been wise to have a 
considerable number of inspectors as distinguished from such a 
number as five, as constitutes your board? A. I should say five 
inspectors, with the arrangements which Mr. Kelsey had made 
for the five inspectors, that they should have clerical assistance 
and accountants is far the easier and quicker way. 

Q. What would have been the effect if you had had fifteen or 
twenty or thirty inspectors ? A. Lawyers, or what, sir ? • 

Q. Well, lawyers, or others, or both ? A. I think there would 
have been a disagreement with lawyers on a great many points. 

Q. I mean to say, would it have affected, in your judgment, 
the speed of the count ? A. I think it would, yes, sir, materially. 

Q.'From your experience, can you not say whether a small 
board, such as your own, is best constituted and fitted to perform 
the work? A. I shoukLsay it was, sir. 

Q. From your experience can you say Avhether it is your opin¬ 
ion that the selection of accountants was a proper and wise 
course? A. I do not see how it could have, been done without 
such selection in any reasonable time. 

Q. What will you say in reference to the hiring of the clerical 
force to do the work described by you? A. If we had only had 
accountants only they would have had to do the work through¬ 
out, and we have hired girls; we have had to train them in each 
process; the first two days we would creep, and after that we 
would get going faster, and we have had to weed them out, but 
they are very much cheaper and do the work just as well — for 
that character of work. 

Q. Is a considerable clerical force from your experience abso¬ 
lutely necessary ? A. Why if we had twice as large a room, sir, 
we could have finished this count long before now, I think. 

Q. That is, if you had more clerical aid ? A. Well, we would 
have had to put in more girls if we had a larger room. They gave 
us the largest room they had in the building. 


Testimony of Mr. Backus. 


505 


Q. You have the largest room? A. Yes, sir; we have the 
board room. 

Q. What I am seeking to ascertain is whether the employment 
of clerical help has been an absolute necessity ? A. I think it 
has, sir. 

Q. What, if any, opinion have you as to the plan adopted of 
appeal, if any, from your determinations to the court, as distin¬ 
guished from appeal to the Superintendent, even if that is per¬ 
missible under the law ? A. Well, I think the Superintendent 
would have had his hands full and our work would have been 
very materially lessened; we would have simply relied on him 
I presume. 

Q. I mean to say, would there have been a constant necessity 
of determining questions which ultimately would go to the courts 
anyway-? A. You mean — 

Q. If there be any appeal ? A. You mean we would have re* 
ferred to him ? 

Q. I mean to say, if there is any question as to this election 
raised? A. I think it ought to go to the courts, sir, and I think 
the law intended it should, by its provision that the inspector 
should keep the ballots for four months, with the envelopes, sub¬ 
ject to the order of any court of proper jurisdiction. I think 
it would have been a very unwise thing indeed for the Superin¬ 
tendent to have mixed up in it in any way. 

Q. During the progress of this count has Mr. Iv°lsey been at 
the meetings of the inspectors ? A. He has not been at the meet¬ 
ings. He has come in there constantly and has asked to know 
what we were doing and has taken a great interest in seeing the 
different processes. I have shown him a great number myself. 

Q. How often would you say he has been present, I mean the 
number of times ? A. I cannot say that. He has come in every 
week, I think, and sometimes more than once a week; but you 
know some processes are long and it is a repetition of them. 

Q. I have omitted to ask you as to what questions came up with 
regard to handwriting, Mr. Backus ? A. You mean with regard to 
the comparison of the name on the ballot with the name on the 
envelope ? 

Q. Yes. A. How, for instance, in some cases the man had 
stamped his name on the envelope. That, of course, was voided 
at once. There were 9,000 votes that we voided without carding 
at all at the very start because they were absolutely against the 


5G6 


Senate Judiciary Committee. 


law. An inspector would look at the two signatures when they 
were challenged and if it seemed to him that the writing was'so 
dissimilar that the same person could not have written both, the 
ballot was voided, but we gave the voter the benefit of every doubt 
in our minds and allowed the party who challenged to have the 
challenge recorded as i\ T o. 1 on the card. 

Q. When you say as No. 1, what do you mean ? A. That is that 
the signatures did not correspond. That is the No. 1 challenge. 

Q. The No. 1 challenge? A. Yes. 

Q. Were there many challenges on the ground of dissimilarity 
of handwriting? A. Well, I couldn’t tell you how many there 
were without having them counted up from the challenge sheets, 
but the challenge did not cut any figure at all by comparison with 
the large vote. 

Q. It is not from that standpoint that I ask, but I mean was 
that an occasional ground of challenge, or did it often occur ? A. 
It frequently occurred. 

Q. How many, approximately ? A. I wouldn’t want to answer. 

Q. Some thousands ? A. Oh, yes, some thousands. 

Q. That is, it is not a matter of merely hundreds but of thou¬ 
sands ? A. Yes, sir; some thousands I imagine. 

Q. What was it that it was claimed by some of the representa¬ 
tives of the ticket should be done by the Beard in regard to ascer¬ 
taining the correctness of the handwriting? A. Well, they wanted 
us to bring experts — bank tellers. 

Q. Was anything asked of you in regard to subpoenaing wit¬ 
nesses ? A. Yes, they wanted us to subpoena witnesses. I never 
saw any affidavits; I understood they were ready to present some, 
but I didn’t — 

Q. Was any request made or any argument made, that you 
had the power to subpoena witnesses? A. Yes, in the briefs and 
in the oral arguments before us. 

Q. What was your conclusion in that regard ? A. In the second 
ruling that we made we didn’t take any action on it, but subse¬ 
quently when it was called to our attention and forced to an issue 
we declined to accept it. 

Q. Did you believe that you had any power under the statute 
to subpoena witnesses? A. We knew we had not — or to admin¬ 
ister oaths. 

Q. Or to administer oaths ? A. We put our girls under oath, 
but that was merely for moral effect. 


Testimony of Mr. Backus. 


567 


Q. I mean, so far as related to tlie ballots or the handwriting 
in reference thereto? A. No, sir. 

Q. As I understand you, you consider yourself powerless under 
the statute to do so? A. Yes, sir. 

Q. Are these policyholders scattered all over the world? A. 
They are. 

Q. Was their request one which involved your subpoenaing 
witnesses from not merely outside of the State but outside of the 
country ? A. No, I know of no request by anyone to subpoena 
anyone, except that they assumed we had power to go into that 
matter. There was no special case. 

Q. If any such power had been attempted it would have in¬ 
volved that? A. Yes it would have involved That, because the 
whole South African vote was challenged. 

Q. The whole South African vote? A. Yes, I think it was the 
South African vote; I am not positive of that. 

Q. Do you remember how many names there were on the 
Mutual ballot ? A. Thirty-six on each tickfet, though one of the 
tickets is a fusion ticket and half of the administration was on it. 
There were 36 on a ticket. 

Q. So that there would be 108 names printed? A. Three 
times 36. 

Q. One hundred and eight names upon the printed ballot? A. 
Yes. 

Q. And each one of those, of course, had to be canvassed? 
A. Yes. 

Q. Now, so that the Committee may get some idea at a dis¬ 
tance, I hand you a photograph and ask you if that was taken 
during some part of the count ? A. This was taken just as we 
were finishing the challenge of the votes on the general challenge 
of the ballots, just as w^e were completing the work. 

(Photograph offered in evidence and marked Exhibit No. 11.) 

Q. Now, Mr. Backus, will you tell the Committee whether 
after this experience in which you have been engaged, whether 
in your opinion before you actually undertook the count, it would 
have been possible to have devised any definite system? A. I 
< don’t think it would, sir. We made a tentative plan before we 
heard counsel, but it was subject to revision, after we had made 
our rulings. I do not think any man could have made a plan for 
this election in advance; I don’t think it is possible. 



) 


568 


Senate Judiciary Committee. 


Q. Will you say why, in your opinion ? A. "Why it was an 
entirely new proposition; no one knew what was coming up or 
anything about it. We had to meet the situation and handle it; 
that is all there was to it. I think Mr. Kelsey did all he could 
when he allowed us to have experts and employ a clerical force. 

Q. Do you now know of any plan under this law which if ap¬ 
plied to the Mutual Life Insurance Company would have pro¬ 
duced a better or more speedy result ? A. If I was to do the work 
over again, sir, I should take exactly the same plan with very few 
changes. There might be some little modifications, as we have 
learned as we went along, but I mean the substantial plan. 

Q. So that the plan adopted, so far as its essential outlines and 
general scheme were concerned, has in your opinion proved by ex¬ 
perience to be the best plan ? A. I think so. We attempted first 
to start without the cards and we had our plan arranged for that, 
but we found it necessary to have the cards to make it speedy and 

accurate. - 

» - 

By Senator McCarren: 

Qr Would you have changed the law in any respect to expedite 
this matter ? A. In a great many respects, sir. 

By Mr. Mayer: 

Q. Since the Senator has asked the question, I think perhaps 
you might tell us in what respects. I think you said something 
about the law being indefinite. A. I do not know that I can go 
into that without notes. I sent some notes up here to a friend of 
mine in the Senate sometime ago; I think lie has them and can 
show them to you; in those notes I make suggestions in regard 
to it. 

\ 

The Chairman.— You are not going to charge Mr. Kelsey, I 
presume, with the law as it stands ? 

Mr. Mayer.— I hope that is one of the things he will not be 
charged with. 

Mr. Hatch.— I on are not going to compel him to go beyond 
the law, I hope ? 

The Witness.— I will say in answer to that, take the one in¬ 
stance of the ballot and the envelope. The law after providing in 
regard to the ballot, the official ballot, says a policy-holder desiring 
to vote by mail must indicate the name of the nominee or nom¬ 
inees for whom he desires to vote, or strike out the name or names 



Testimony of Mb. Backus. 


5G9 


of those for whom he does not desire to vote upon the statements 
so provided, or must otherwise suitably indicate in writing the 
name of the nominee or nominees for whom he desires to vote, 
and must sign the said statement or other writing in his own 
handwriting in the presence of the subscribing witnesses, and the 
statement when so marked and signed, or such other writing when 
signed, shall become a ballot. Then it goes on after that to say: 
“ Such policy-holder must enclose the statement so marked, or 
such other writing in such return, or a similar envelope upon 
which must be written his signature in his own handwriting and 
his post-office address and the number of at least one policy held 
by him. Such envelope containing the ballot sealed and post¬ 
paid may be mailed by the policy-holder to or may be delivered 
at the home office of the company.’’ I do not think it was the 
intent of the law to make tbc envelope a part of that ballot, but 
the language there makes it a part of the ballot, and we deemed 
it to be mandatory, and I think that that lengthened the work 
quite considerably. Of course, if we had had larger space we 
would have had more girls and ve could have done quicker work 
than as it was. 

Q. You could not have changed the law if you had had more 
girls to perform the work? A. Oh, no, 

Senator McCarren.—• We did try to change it up here, but we 
were told that it was perfect. 

Q. There is just one question — you have answered it, but I 
desire to have it emphasized. You have, as I understand, the 
largest room there is in the Mutual Life Insurance offices? A. 
Yes. We asked for more room, but they said they could not 
give us but one room on the other side of the building, which 
was not as large as the one we had, and we could not divide our¬ 
selves. 

Q. As a final question, perhaps, would you say that this work 
involved enormous detail and that it has been done as speedily, 
in your opinion, as it was possible for new work of this character? 
A. I do not believe that any five men could do it any quicker or 
more accurately than has been done and preserve all of these 
objections that have been made to these ballots. 

Q. Did I ask you whether you had been subpoenaed? A. You 

did not ask me, but I have been. 

Q. Mr. Backus, I forgot to ask you one question, whether 



7 


570 Senate Judiciary Committee. 

frequent daily changes occur in the addresses of policy-holders, 
do yon know? A. Frequent daily changes; what do you mean? 

Q. Of the addresses of policy-holders? A. Oh, yes, there 
are constant changes of addresses of policy-holders. It amounts 
up to hundreds of thousands, and that Albany list contained 
about 70,000, I think, who had paid-up policies, and the com¬ 
pany does not keep in touch with them at all, and the result is 
they do not know their addresses. They put down the last 
known address. 

Jay E. Lawshe, called ,as a witness, being duly sworn, testified 
as follows: 

By Mr. Mayer: 

Q. Mr. Lawshe, what is your profession ? A. I am an attorney 
and counsellor-at-law. 

Q. And you reside where? A. Thirteen West One Hundred 
and Third street, New York city. 

Q. Where is your law office? A. Sixty Wall street. 

Q. Were you appointed an inspector of election for the 
New York Life Insurance Company? A. I was. 

Q. By whom? A. Hon. Otto Kelsey, State Superintendent of 
Insurance. 

Q. And on what date? A. December 17th. 

Q. Nineteen hundred and six? A. Nineteen hundred and six. 

Q. Did you take the oath of office ? A. I did, on that day. 

Q. Now, when did your Board organize? A. On that day. 

Q. And who was made its chairman ? A. I was. 

Q. Do you recall what, if anything, Mr. Kelsey said to you on 
the 17th of December — I mean to all of your Board? A. AYs. 

Q. Well, will you just state briefly what it was? A. He an¬ 
nounced our appointments, specified the companies to which we 
had been severally designated; told us that we should retire to 
separate rooms and organize and discuss the ways and means 
which we should employ on the following day in the reception of 
the votes. 

Q. Yes. Now, the election was on December 18th ? A. It was. 

Q. Were you present at the offices of the New AYrk Life In¬ 
surance Company on that date? A. I was, all day. 

Q. Now, without going into detail at all, hut just in a general 
way, will you describe what took place on that day, so far as the 


/ 


Testimony of Mr. Lawshe. 571 

/ 

delivery of votes is concerned? A. We attended before the open¬ 
ing of the polls. At the hour specified by law, I declared the 
polls officially opened and announced that any votes would be 
received. Shortly thereafter Mr. Freund, who was one of the ex¬ 
aminers in the Department of Insurance, who had been in daily 
attendance at the New York Life Insurance Company, taking 
official control of such votes that came by mail, turned over to the 
inspectors acting jointly with John C. McCall, the secretary of 
the company, something over 192,000 ballots which had been re¬ 
ceived by mail prior to the 18th day of December. 

Q. That name is Fuld? A. Yes, Fuld, not Freund. Each 
of these votes or ballots was in an envelope, sealed, and bore a 
stamp showing the time — the date on which it had been received 
by Mr. Fuld, he having, so I am informed, received all of the 
mail of the New York Life Insurance Company from October 
18th to December 18th, and had retained in his official custody all 
envelopes which bore the substantial endorsement “ Ballot for 
Directors.” Shortly after the opening of the polls and after the 
reception of these 192,000 odd ballots to which I have referred, 
various persons came in to vote in person. Thereafter, shortly 
after the opening of the polls, the three persons designated as the 
proxy committee on behalf of the Administration Ticket, voted a 
large number of proxies, the same being delivered to us in huge 
wicker hampers, containing a large number of envelopes, each of 
which contained approximately 200 proxies, to which envelopes 
were attached ballots which we have since styled “ Blanket Bal¬ 
lots,” each so-called blanket ballot purporting to cast 200 votes 
for each of the twenty-four candidates therein named, by virtue 
of the 200 annexed proxies. I can at any time you desire give 
you the total of the proxies and other votes. 

Q. What, in round numbers, is the total number of names on 
the list of the New York Life; that is, I am speaking now of the 
full number of policy-holders ? A. If you will permit me, I shall 
refer to my memoranda, as I do not wish to trust my memory in 
such a matter. There are, it is stated and I believe, upward of 
850,000 persons qualified to vote in the New York Life Insur¬ 
ance Company. 

Q. Now, how many papers or statements purporting to be 
official statements or ballots, were received, not finally counted 
as ballots, but physically received ? A. Including proxies ? 

Q. Including proxies? A. I can give you, if you desire, a 


572 


Senate Judiciary Committee. 


summary of the total vote by classes; that is, votes in person and 
votes by mail and by proxy, if you so desire. 

Q. I wish at this point you would do that? A. On the day 
of the election there were delivered to us over the counter, if I 
may use the expression, 360 votes in person or by personal mes¬ 
senger, as for instance, a father sending his son. We received on 
that day from the representative of the State Superintendent of 
Insurance, 192,499 votes, which had been received by mail up 
to that time. There were delivered to us, in addition, 90,716 
votes, and 124,248 proxies all told, making a total of 407,823 
votes and proxies. 

Q. So that this 407,823 votes, inclusive of proxies, were the 
matters with which you had to deal ? A. They were. 

Q. Do you know whether or not the votes received by the com¬ 
pany were stamped with the stamp of the Insurance Department ? 
A. They were. Each vote bore the stamp of the representative 
of the Insurance Department, together with the date upon which 
the same was received in the mail. 

Q. Yes. Yow, in the Ye\v York Life Insurance Company, is 
the system of keeping the names of the policy-holders the same 
as in the Mutual Life? A. I don’t know as to the Mutual Life. 
In the Yew York Life, however, the names of the voters are ar¬ 
ranged in the so-called Brief Department, according to the 
policy numbers, serially, and in the so-called Index Department 
they are arranged according to the alphabet, which includes, it 
being arranged on the card index system — upward, I suppose, of 
5,000,000 cards, there being a card for every person who has ever 
been insured in the company, as well as every person who has 
ever applied for insurance in the company. 

Q. Yow, is that system an alphabetized system ? A. It is. 

Q. In the card index system? A. Yes. 

Q. And is it alphabetized to the last letter of the name ? A. I 
don’t know as to that. I suppose, to the fourth or fifth letter, in 
any event. 

Q. Yes. Then, it is alphabetized to a considerable extent of 
detail at any rate ? A. Oh, yes. It is more than a mere alpha¬ 
betical arrangement, in any event. It goes to the fourth or fifth 
letter. 

Q. Yow, will you describe to the Committee the process or . 
method used by the Inspectors of the Yew York Life in counting 
the papers or ballots purporting to be what are known under the 


Testimony of Mr. Lawsiie. 


573 


law as the official statements, and you can use your — as you 
proceed, just exhibit the various documents? A. If I may, I will 
sketch our process hurriedly first, and then go back and describe 
each process as you may desire. 

Q. Yes, just do that in your own way, and if you have any 
memoranda you desire to use, of course there is no objection to 
that. A. Our process fell under practically six divisions. We 
first made a total count of all of the alleged ballots which we found 
in our custody. In that process the envelopes containing the 
ballots were counted by means of numbering machines, still 
unopened, and for the purposes of that process each envelope was 
deemed to contain one ballot, in accordance with the provisions 
of the statute. After the completion of the total count we found 
it necessary to separate proxies from their respective blanket bal¬ 
lots, because we found that the proxies attached to any given 
blanket ballot came from all over the world, and were not them¬ 
selves sorted, as we found it necessarv, for reasons which I shall 
state later, to sort the ballots and proxies according to geographical 
countries, according to the alphabet — we had to separate these 
proxies from their blanket ballots, and that entailed first passing 
upon the blanket ballots to determine their sufficiency in form. 
So the second step was passing upon the blanket ballots, each ballot 
being given a number, and each of the proxies accompanying that 
particular ballot being given the same number. So that should 
it become necessary we could refer any given proxy to the ballot 
under which it had been voted. After the completion of our 
examination of the blanket ballots, the ballots in the envelopes, 
still unopened, and the proxies were sorted according to geo¬ 
graphical divisions, according to states and countries, foreign and 
domestic. After the completion of the geographical sorting, the 
ballots and proxies in each State and country were counted and 
done in bundles of approximately 250 each. The third step 
consisted of a classification of the ballots, and having sorted our 
ballots and proxies previously according to countries, we could 
then handle the votes of a given State, classifying them according 
to the ticket voted, as a good, bad or challenged administration 
vote, as a good, bad or challenged international committee vote, or 
as a good, bad or challenged split vote. The classification took 
place at tables at which we had placed a clerk, a man and several 
girls, and there was present at each table a watcher from each of 
the interested factions, the administration and the International 


574 


Senate Judiciary Committee. 


. V 


Policy-holders’ Committee. A bundle of ballots, we will say from 
the State of Yew York, were taken to the classification table and 
opened at one end thereof and opened one by one by a girl, who 
passed the envelope and the ballot to her neighbor, who attached 
the same together by means of a stapling machine, it being neces¬ 
sary, under the law as we understood it, to preserve both the 
envelope and the ballot, the policy-holder’s signature being re¬ 
quired to be on each in his own handwriting. After the ballot was 
affixed to its envelope, it was passed to another clerk, who stamped 
on the back a rubber stamp which had certain letters of the alpha¬ 
bet, under which the classifier would make a check mark indicat¬ 
ing roughly the classification into which this vote would fall, as 
a good, bad or protested administration vote, etc., as I have pre¬ 
viously described. The classifier was watched by a watcher from 
each side, and if the classifier marked a vote good or void, it was 
concededly so by both watchers. If either watcher saw fit to chal¬ 
lenge a vote, he did so at that time, and we had previously codified 
the grounds of challenge, assigning to each ground of challenge 
as it came up a number. The classifier thereupon wrote upon the 
back of the ballot a certain number or numbers which would 
specify the ground of the challenge. Each of the watchers haying 
before him a copy of this code of challenges could very readiby 
indicate the grounds of his challenge by uttering certain numbers, - 
which were written down on the back of the ballot under a stamp 
which indicated the name of the person challenging the vote, all 
of the watchers having been given separate stamps which bore 
letters, corresponding to their names as registered in our daily 
register of watchers who attended the meetings. As the votes 
went by the classifier and were marked either good, bad, conced¬ 
edly good or admittedly bad, or became challenged votes, they 
were taken to another table and placed in pigeon-holes correspond¬ 
ing to the classification. On being removed from the pigeon-holes, 
they were taken to other tables and arranged according to the 
alphabet. I may as well state why we arranged them according 
to the alphabet, at this time. 

Q. Yes. A. The Yew York Life Insurance Company filed, as 
I understand it, in compliance with the requirements of the statute, 
in Albany, a list containing the names of all of the persons who 
were qualified to vote, being policy-holders in good standing, their 
names being arranged alphabetically within various geographical 
countries, and they — the secretary of the company announced to 


575 


Testimony of Mr. Lawshe. 

us at one of the first conferences which we had after the 18th day 
of December, that he would be able to furnish us from the com- 
pany’s stencils a substantial duplicate of that list which we could 
use for checking purposes, and as that list would be arranged 
according to the alphabet and within geographical distributions, 
we felt it imperative that we arrange our ballots in the same way, 
to facilitate checking. The total number of policy-holders entitled 
to vote, as I have previously stated, being approximately 850,000, 
we found their names, when delivered to us, to be contained in 
upwards of 347 volumes, ten names on a page. Now, by having 
our ballots arranged in the same manner in which the names ap¬ 
peared on that list, that is, alphabetically and within States and 
countries, we were then able when it came to checking the names 
against the list for the purpose of preventing duplications, to give 
a given clerk a small volume containing, we will say, A to B in 
New York State, together with the bundle of ballots A to B in 
New York State, and that process could be multiplied as many 
times as we had room to accommodate the clerks, so the checking 
could go on all at once. Whereas, had we taken the ballots hit or 
miss at random, we would have been compelled to thumb through 
850,000 names to find one man. Moreover, it would have been, 
as we thought, impossible to prevent duplication of voting without 
such an arrangement, because of the repetition of names — John 
Jones, of New York City, and John Jones, of Newark, New Jer¬ 
sey, and elsewhere about the country; so that we might identify 
the voter, we had to find him in the list under the place where he 
lived. That was the fourth step. The fifth step was passing on 
the challenged votes, and that has been done by the inspectors, 
there being now three of us acting together as a unit. Certain 
challenged votes we rejected as being erroneous in principle. The 
whole total of the challenged votes, challenged classes having been 
themselves subdivided by our clerks, by reference to the numbers 
we, for instance, put challenges going merely to the address to- ' 
gether, and we put challenges which raised the question of hand¬ 
writing together, and challenges which referred to other matters, 
as, for instance, the address or policy number written in handwrit¬ 
ing other than that of the voter, together, and the latter we over¬ 
ruled as a class, deeming these challenges ill-founded in theory. I 
can summarize, if you desire, the numbers of challenges which we 

had. 

Q. Yes. A. We had, in round numbers, 260,000 challenged 
votes, of which 31,250 went to the question of handwriting. We 


576 


Senate Judiciary Committee. 


had 25,000 challenges on the ground that the address of the voter 
as it appeared on the envelope was defective or insufficient. We 
had 46,500 challenges, in round numbers, going to the physical 
condition of the envelope enclosing the ballots, as, to wit, that it 
was received unsealed or had been tampered with before being 
delivered to the company, or that the number on the ballot was 
not written by the voter, or that the number and address on the 
envelope was not written by the voter, etc.; and we had miscel¬ 
laneous challenges to the number of 12,250, making a total of 
260,000. The inspectors deemed it their duty, under the law, to 
pass personally on all questions of disputed handwriting, there 
being of those, as I have stated, thirty-one odd thousand. We 
deemed it our duty also to pass personally upon the question of 
the sufficiency of address, of which there were 25,000. 

Q. May I interrupt you to give an illustration there, for in¬ 
stance? A. I brought with me, Mr. Mayer, one ballot and an 
envelope attached in the manner used by us. As you will see, 
under the law the policy-holder must write his name on the 
envelope in his own handwriting. He must sign the ballot here 
(indicating) in his handwriting; therefore this signature (indicat¬ 
ing) and this signature (indicating) must correspond. 

Q. That is, the signature on the ballot and the signature on the 
envelope ? A. Yes. AVe have found a great many cases where a 
man would write his name here (indicating) John F. Jones, and 
on the other, J. F. Jones. Those, for instance, we disregarded. 
But here (indicating) was the place for the witness to sign his 
name. 

Q. Pointing to the portion of the ballot on the lower left hand, 
with the words “ Signed in the presence of ? ” A. The signature 
of the subscribing witness. AA 7 e had a great many challenges on 
the ground that the signature of the policy-holder and the signa¬ 
ture of the subscribing witness were both in the same handwrit¬ 
ing. That is challenge Xo. 43 on the list you have before you. 
So in each case of a disputed ballot where the question of hand¬ 
writing was involved in any sense, we had to compare this writ¬ 
ing of the witness with that of the policy-holder on the ballot, and 
then compare the name on the envelope with both. On the back 
I have placed a stamp such as we used for classification, the letters 
“ KP.” denoting the class of vote. Had this been a good admin¬ 
istration vote, it would have received a check mark here (indi¬ 
cating). 

Q. Pointing to where ? A. To the letter “A.” 


Testimony of Me. Law.she. 


577 


By Senator McCarren: 

Q. Have you any means of knowing how the percentage of 
challenges was distributed; that is to say, how many challenges 
emanated from the so-called administration ticket — is that the 
name of it? A. Yes. 

Q. (Continuing.) And how many challenges emanated from 
The other ticket? A. I cannot give that in detail without a little 
study, Senator. If you will give me a few moments, I think I 
can —.yes, I can give that. Of the 192,000 odd votes which were 
received at the home office of the company by mail prior to and 
including the 18th day of December, there were 95,546 votes ap¬ 
parently in favor of the administration ticket which were chal¬ 
lenged by the Avatchers or representatives of the International 
Policy-holders’ Committee. That is, of course, disregarding 
55,680 votes which were concededly good, in favor of the ad¬ 
ministration. 

Q. There were 95,000 out of 196,000 challenged ? A. No. If 
you will bear with me, I will total these. (The witness here per¬ 
formed a mathematical calculation.) There were out of these 

• * 

192,000 ballots approximately 162,000 in which the voter had 
attempted to vote the administration ticket. Of those, 55,000 plus 
were concededly good,' 10,000 plus were concededly bad through 
the defective manner in which the vote was executed, and 95,000, 
which is, of course, more than all the rest — more than half — 
95,000 odd were challenged on various grounds. 

Q. That is the entire administration ticket? A. Yes. Now, 
I can give you the details of the other- 

Q. That is sufficient. A. Now, just there, on the proxies — 
well, of the- 

By Mr. Mayer: 

_ / 

Q. Well, you need not count them. A. The proxies were the 
same way; I guess even a. greater proportion of challenges, and 
the foreign vote in some countries was challenged almost in toto. 

By Senator McCarren: 

Q. By whom ? A. By the representatives of the International 
Policy-holders’ Committee, the greater portion of the foreign vote 
being in favor of the administration. 

19 





I 


578 Senate Judiciary Committee. | 

i 

By Mr. Mayer: 

Q. Have you completed the- A. Ho, not quite. The last 

step in the process consists in the verification of the qualifica¬ 
tions of the voter to vote. Having sorted the ballots, of course, 
according to good and had, because, of course, the challenged 
classes disappear as they are passed upon by the inspectors, the 
qualification of the voter is determined — investigated; and I 
will say in this connection that we are checking every policy 
number, having recourse to the company’s records, checking the 
policy number of every ballot before us. 

Q. Have you a special telephone system from the room in 
which you are working to the company’s rooms? A. We have, * 
and the manner in which we have tested these numbers is sub¬ 
stantially as follows: The company has a direct wire — several 
direct wires from the room in which we are working to its so-called 
brief department, which, as I have heretofore explained, contains 
a card index system arranged serially. Our clerks wishing to make 
any inquiry about a given ballot, write the policy number as it 
appears on the envelope on a slip of paper and hands the same 
to a telephone girl who is in the employ of the company and not 
our employee. That employee of the company telephones down¬ 
stairs to the brief department, and in due time the slip comes 
back with a name and address written beneath that policy num¬ 
ber. You will observe that we* give absolutely no information 
in regard to the identity of the voter, and the clerk to whom we 
submitted this number had no means of seeing the ballot, as she 
was given merely a slip of paper with a number on it, it being 
to all intents in the nature of a cipher to her; and if the name 
and address came back to us corresponding with that written on 
the ballot and envelope, we deemed that a sufficient safeguard 
and verification of the correctness of the number. A large num¬ 
ber of numbers were also checked by having recourse to the 
index department, which I have heretofore described, and in that 
process we had the index boxes brought up at night to our rooms, 
because the company in its own daily business withdraws from 
that department perhaps eight or ten thousand cards, and if we 
attempted to use the cards in the day time it would have thus 
seriously handicapped and hindered the company in its.business, 
and by doing it after hours we could do it very much more rap¬ 
idly. The checking of the names against the list of policy¬ 
holders was also necessary to prevent duplication. As I have said 




I 


Testimony of Mr. Lawsiie. 579 

before, the name John Jones or any other name, for that matter, 
may appear several times within the same city, or many times 
in the same state and in other states as well, so having taken 
John Jones of snch-and-such street, New York city, we turned 
to the book and stamped his name with a number, which is the \ 
number upon which his ballot rests, so that at any time by turn¬ 
ing to this book of names we can tell just where to lay our finger 
on his ballot by the number there, but the number does not dis¬ 
close to any person who might look at the book how this man 
voted. We deemed that improper to preserve a record of the 
way policy-holders voted,' as we did not wish the same to fall 
in the hands of either side, either the company or the Interna¬ 
tional Policy-holders’ Committee, and they will be unable to tell 
' from that boo'k, which I assume will be destroyed with the ballots, " 
which way anyone voted; and if it were not destroyed, nobody, 

■ would be able to tell how a man voted by the cipher numbers 
which refer solely to our numbers. In the course of time, if a 
clerk coming to the name of a voter in New Jersey finds the 
number opposite his name, that is a sure indication that he has 
previously voted. The bundle number indicates the bundle in 
which that previous ballot will be found. If a duplicate ballot 
is found, the other ballot is withdrawn and a circle drawn around 
the number in the book to indicate some doubt about the vote, 
and these two duplicates are laid aside, and we will determine 
when we scrutinize them which is a valid vote. 

Q. What has been your ruling in reference to the reception 
of a vote where there is duplication ? Has the first vote been re¬ 
garded as the valid vote? Let us assume that a man has voted 
the same way several times. A. Mr. Mayer, the examination and 
consideration of duplicate votes being in the very nature of the 
case the last step possible, we have not taken up duplicates. 

I will say, however, that they are piling up very rapidly, and we 
have several thousand already accumulated. Some men have 
voted in entire good faith four or five times, bn a separate 
policy each time, for tl;e same ticket. There are men who have 
changed their minds and sent in later votes for a different ticket, 
or t-hev have given proxies, and so that question has not come be¬ 
fore us completely as yet, so any expression on my part at this 
time would be purely academic. 

Q. Have you completed your statement of the. general sub¬ 
jects? A. That covers it, yes. Having checked the names in the 


580 


Senate Judiciary Committee. 


books for the purpose of weeding out duplicates, we will then 
pass on the duplicates and we will be able by recourse to our 
bundles, which each bear a tally card stating the class of the 
vote — each bundle bears a tally card which states t.lie class of 
the vote, the number therein contained, the country from which 
it came and other particulars — and when the duplicates have 
been all gone over, that tally will show the net number of good 
votes in that bundle, and a totaling of the net si^ims from the 
various tally cards will give us our total good vote and bad vote. 

By Senator McCarren: 

Q. Is the number of those who-have changed their votes con¬ 
siderable ? A. I think so. As I say, we have not yet carefully 
scrutinized the instances of duplication, but we find a large num¬ 
ber of votes where the policy-holders have voted early and often — 
that is, they'have voted on each policy number they hold. We 
have also a goodly number of instances in which the voter has 
written on his ballot “I have previously voted such and such 
a ticket,” or “ I sent such and such a ballot to so and so, hereto¬ 
fore, but I now send this to you to be sure that it will be counted,” 
thereby showing that he had previously voted, and perhaps, on 
the other side of the fence. 

By Mr. Mayer: 

Q. Have there been any occasions where you have compared 
the signature on the ballot with the signature on file in the office 
of the company ?, A. Oh, hundreds and hundreds and hundreds 
of instances, sir. It will run into the thousands, because in any 
case of disputed handwriting, that is, if a ballot — and you will 
notice from these ballots which I have sent you that , we keep 
all our records on the back of the ballot itself, and deal solely 
with the original records in every instance, having no secondary 
records — if .a ballot comes to us, and shows a discrepancy or is 
c a lenced on the ground of a discrepancy in the handwriting, 
if the discrepancy between the signature on the ballot and that 
on the envelope is not glaring and patent, we send for the origi¬ 
nal application of that policy-holder, which is on file in the file- 
room of the company. The application consists of his original 
application for insurance, to which is affixed the medical examina¬ 
tion, on both of which papers his conceded signature appears, 
and then all letters and memoranda annexed to that man’s policy 





Testimony of Mr. Lawshe. 


581 


are kept affixed thereto by the company, so that frequently in 
the cases of applications which we send for — there are always 
two, and frequently eight or ten or more admittedly good sig¬ 
natures of the man in question, and there we have a number of 
concededly good examples of the voter’s handwriting with which" 
to compare this ballot, and as 1 say, we send for hundreds and 
hundreds of them every day. 

Q. Have you now generally described the process of your work ? 
A. Except that as a challenged vote is passed upon by the in¬ 
spectors, it is restamped on the back with a stamp indicating the 
inspector’s classification, which is final, unless in the examination 
of duplicates w T e find it necessary to refer back to that man’s vote 
again-to see whether or not it was really good. 

Q. k T ow, I show you a paper which I will call for convenience, 
the New York Life key of challenges, and ask you to describe that 
briefly ? A. r /his is a list of the challenges made by watchers 
during the canvass. 

Q. Now, does each challenge bear a number? A. Each chal¬ 
lenge bears a number, and they — and each challenge was given 
a number which would be in the nature of a code or cipher num¬ 
ber in order that that number might be set down on the back of the 
ballot by our clerk when the challenge w T as made to save labor of 
writing down the particular and specific grounds of the challenge. 
You will notice that some of the numbers are 'blank. In prepar¬ 
ing the list we purposely left blank spaces for additional grounds, 
if they came up, so that we could insert them. 

Mr. Mayer.— I offer that in evidence. 

(Paper admitted and marked Exhibit No. 148.) 

EXHIBIT No. 148, NEW YORK LIFE ELECTION, 1906. 

List of Challenges Made by Watchers. 

Appendix C. 

A. Against Envelopes. 

1 Blank (no endorsement). 

2 No name. 

3 Name not written by voter. 

4 Name on envelope and ballot different. 

5 No address. 

6 Incomplete address. 



582 


Senate .TnmciAitY Committee. 


) 


7 Addresses on envelope and ballot do not correspond. 

8 

9 Policy number inserted by other than voter. 

10 No envelope. 

11 Policy number on envelope and ballot different. 

12 Address not written by voter. 

13 Signature on envelope and witness in same handwriting. 

14 Not enclosed in envelope. 

15 

✓ 

1G Policy number wrong. 

17 Without words “ Ballot for Directors, Address and for 

Policy No.” 

18 Envelope unsealed. 

19 Envelope tampered with. For that the envelope had been 

opened by the International Policy-holders’ Committee 
after the policy-holder had deposited it in the mails for 
transmission to Hon. Richard Olney, Chairman, The In¬ 
ternational Policy-holders’ Committee, No. 30 Broad 
Street, New York, N. Y., which was the only nama or 
address'it bore where the policy-holder mailed it, and the 
contents thereof was by them thereupon taken out of the 
envelope and the pretended ballot which the envelope now 
contains was'by them put in the envelope and the envelope 
was by them again sealed up, the same having been both 
opened and sealed again in such artful and cunning manner 
and form as to elude detection if possible and to deceive 
the inspectors of election, and was by them delivered in 
sealed boxes to the Inspectors of Election, each and all 
without the knowledge, request or consent of the policy¬ 
holder. - 

20 Envelope not addressed to New York Life Insurance Com¬ 

pany. 

21 Policy-holder’s name forged on envelope. 

22 
23 


B. Against Ballots. 

31 Blank (includes also Mutual ballot and other foreign papers). 

32 Incomplete signature. 

33 Name not written by voter. 



Testimony of Mr. Laws he. 


583 


35 Policy-holder’s name forged on ballot. 

36 

/ 

38 No policy number. 

39 Policy number inserted by other than voter. 

40 

42 No witness. ' 

43 Signature of witness and policy-holder in same handwriting. 

44 No enclosure in envelope. 

45 Voted previously or more than once. 

46 Policy number wrong. 

47 Vote cast for over twenty-four candidates. 

48 Name of ticket omitted. 

49 Vote is for “ ticket other than individuals named.” 

50 Does not show clearly for whom vote is cast. 

51 BaUot not executed by qualified voter. 


C. Against Proxies. 

61 . 

62 No name. 

63 Name not written by policy-holder. 

64 Incomplete signature of policy-holder. 

65 No address. 

66 Incomplete address. 

67 Proxy holder’s name inserted after execution of proxy. 

68 No policy number. 

69 Policy number inserted by other than policy-holder. 

70 Policy number changed after signature. 

71 Date changed by person other than policy-holder. 

72 No witness. 

73 Signature of witness and policy-holder in same handwriting. 

74 Dated incorrectly. 

75 Voted previously or more than once. 

76 Date inserted by other than policy-holder. 

77 Not dated. 

78 Dated prior to October 18, 1906. 

79 Proxy not voted for administration ticket. 

80 Revoked. 

81 Dated after December 17, 1906. 

82 Policy-holder’s signature changed. 



584 


Senate Judiciary Committee. 


S3 Proxy holder’s name changed. 

84 Address wholly or partially inserted by other than voter. 

85 Proxy executed by other than policy-holder. 

86 Has executed other proxies. 


D. Against Blanket Ballots. \ Page of Record. 

91 That name of ticket is not on ballot. 613 

92 As to number of proxies.613 

93 On ground of previous vote by ballot.v. . . . 807 

94 Ballot voted by an individual covers proxies in names 

of three persons.'... 814 

95 Policy numbers on ballot attached by other than proxy 

holder, being secret information furnished to outside 
people.".. 814 

96 Notation attached. 815 

97 Address wanting . .. 820 

^98 Proxy holder offered ballot, but left before it was 

voted. .*..... .. .• 827 

99 Proxv holder not identified. 863 

100 No evidence that he voted personally on day of elec¬ 

tion as shown by record. 863 

101 Incomplete address. 888 

102 Re proxies being not “ or severally ” where signed by 

one person ..; 925 

103 Ballot not signed .. 935 


Also additional ground for adjudication by inspectors. 
No. 8. No policy number on envelope. 


Q. Now, just refer to challenge No. 6. That was incomplete 
address l A. On the envelope. 

Q. On the envelope. Was that a frequent source of challenge ? 
A. Very frequent. We had at least 25,000 challenges on that 
ground. For instance, in the vote from Canada we had hun¬ 
dreds and hundreds of challenges on the ground that an address, 




















585 


Testimony of Mr. Lawsiie. 

as, for instance, No. 22 Blank street, Montreal, was a defective 
address, on the ground that it did not say “ Canada.” 

Q. Give ns an illustration of a challenge in this country, for 
instance. A. Well, 320 Broadway would be challenged as a 
defective address, although the ballot itself — inside ‘the ballot 
would be dated at New York city, and mailed at New York city, 
but if the envelope said merely 320 Broadway, or 320 Broadway, 
City, it would be challenged as defective. 

Q. No. 9 is ■“ Policy number inserted by other than voter.” 
Was that frequent? A. It was very frequent. It was imme¬ 
diately overruled, however, as we deemed it insufficient. 

Q. Without going into details, I will .ask you this general ques¬ 
tion. Were some of these challenges, I mean, general challenges 
on principle as distinguished from particular instances, sustained 
or not sustained ? A. The larger or broader classes of challenge 
were overruled on principle. We read the law differently. 

Q. And then, in addition to that, were there challenges that 
went to a specific state of facts ? What I am seeking to ascertain 
was whether there were certain challenges which involved a broad 
question of the interpretation of the statute ? A. Yes. ' . 

Q. And then, in addition there were certain challenges, such, 
for instance, as handwriting which involved an investigation as to 
the fact or the appearance of the handwriting by the inspectors ? 
A. Yes, the broader grounds of challenge related to the physical 
condition of the ballot or its envelope when received by us, as for 
instance, the challenge 19 or 20, I forget which, referring to the 
condition of the envelope. 

Q. Yes. Now, I hand you a paper which I shall ask to be 
marked as Exhibit No. 149, which is headed •“ Stamps used at 
classification tables ” and ask you to explain the meaning and 
use of those stamps ? A. The stamp B. at the head of the page, 
marked No. B., is the stamp which was placed on the back of all of 
the votes which were delivered bv the International Committee to 
us on the day of election. No. P. stamp was the stain]) which 
was impressed on the back of the 360 votes which were voted into 
the ballot box by individuals on the day of the election. No. Q. 
stamp.is that which was impressed on the back of the 192,000 odd 
.votes which came by mail up to and including the day of election ; 
and the No. S. stamp is that which was put on the back of the vari¬ 
ous proxies. There below are some small stamps. The one on the 
left — the lower line on the left, indicating that the ballot on 
which that was placed had been challenged by the International 




586 


Senate Judiciary Committee. 


Policy-holders’ Committee by the watcher whose letter was Z. 
The stamp in the middle of the bottom of the page would indi¬ 
cate that the ballot on which that occurred had been stamped 
by the watcher on behalf of the administration ticket, whose letter 
was “ O.” The stamp to the right, which reads Envelope re¬ 
ceived unsealed,” was put upon ballots which were received un¬ 
sealed by the inspectors. 

Q. Yow,~ under each of these numbers, B., P., Q., and S., as 
explained by you, are the letters A., B., C., D., E., F.; G., II., J. 
Will you explain what “A.” means? A. A good vote in favor of 
the administration ticket. 

Q. And B. ? A. A bad vote in favor of the same ticket. 

Q. C. ? A. A challenged vote in favor of the same ticket. 

Q. D. ? A. A good vote in favor of the International Policy¬ 
holders’ Committee ticket. 

Q. E. ? A. A bad vote for the same ticket. 

Q. F. ? A. A challenged vote for the same ticket. 

Q. G. ? A. A good split vote. 

Q. H. ? A. A bad split vote. 

Q. J. ? A. A challenged split vote. I may add that into J., 
since we kept no class for scattering defective votes, we threw into 
.Class H. all the rubbish which we received. There was a great, 
deal of foreign matter. 

Q. Tn that connection how would you denote in which class a 
vote fell, by check mark or how? A. By a blue check mark in 
the little square as indicated on these papers which I now hand 
you, as for instance, a check mark in the square E. would indi¬ 
cate that this was a ballot cast on the day of the election over the 
counter and was a concededly bad vote in favor of the Interna¬ 
tional Policy-holders’ Committee candidates. 

t/ 

Q. That is, the square E. under the heading P. ? A. Yes. P. 
would show you the nature of the vote, and E. would show that it 
was concededly bad. 

Q. You also hand me typical stamps and checks in regard to 
other ballots? A. Yes. A large number if you wish. 

Q. Yes, let us have them and I will have them marked. A. 
(Papers handed to Mr. Mayer.) 

Mr. Mayer.— I offer those in evidence also. 

(Papers marked, respectively, Exhibits 149, 150-A, 150-B, 
150-C, 150-B, 150-E, 150-F, 150-G, 150-IT, 150-1, 150-J, 150-K, 
150-L, 150-M, 150-Y, 150-0, and are as follows) : 

Exhibit 149 reads as follows: 




Testimony of Mr. Lawshe. 587 

* 

STAMPS USED AT CLASSIFICATION TABLES: 


A 

B 

C 

D 

No. R, 

E 

F 

G 

\ 

H J 

► 

/ / 

A 

B 

C * 

D 

No. P. 

E 

F 

G 

H J 

A 

B 

C 

D 

No. Q. 

E 

F 

G 

H J 

A 

B C 

D 

No. S. 

E 

• 

F 

G 

H v J 

Intnl. 

P.H. Com. 

Administration 

Envelope received 


Protested Protested. Unsealed 


Z. 0. 


Exhibit 150-A. is as follows: 

BALLOT CAST ON DAY OF'ELECTION CLASSIFIED 
AS “ BAD ” — I ATT. — UNCHALLENGED. 


No. P. 

A B C D E F 


G H J 


\ 


Exhibit 150-B. is as follows:. 

BALLOT CAST ON DAY OF ELECTION CLASSIFIED 
AS “ GOOD ” — ADM. — UNCHALLENGED. 


No. P. 

A B-C D E F G H J 





588 


Senate Judiciary Committee. 


Exhibit 150-C. is as follows: 


MAIL VOTE CLASSIFIED “ BAD ” — ADM. — UNCHAL¬ 
LENGED. 

• « 

No. Q. ' . ' 

A B C D E F G H J* 


Exhibit 150-D. is as follows: 

* / 

MAIL VOTE CLASSIFIED AS “ GOOD” SPLIT — UN- 
, , - CHALLENGED. 

No. Q. 

ABC DEFGHJ 


Exhibit 150-E. is as follows: 

~ -0 

PROXY CLASSIFIED “ GOOD ” — INTL.— UNCHAL¬ 
LENGED. 


‘ No. S. 

ABC —B— E F G H J 


Exhibit 150-F. is as follows: 

• 

PROXY CLASSIFIED “ GOOD ” — ADM.— UNCHAL¬ 
LENGED. 

(Afterwards revised and corrected by inspectors.) 

No. S. 

ABCDEFGHJ 




i 






Testimony of Mr. Lawshe. 589 

K. 

Inspectors’ Classification. 

L. 

.j ; . . 


Exhibit 150-G. is as follows: 

MARK VOTE CLASSIFIED FOR ADM. CHALLENGED. 

! 

No. Q. 

A B —€1-D E F G H J 

Inti. P. H. Com. 

Protested. 

-P. 

3 

9 

33 

35 


Exhibit 150-H. is as follows: 

BALLOT DELIVERED BY INT. COM. PROTESTED BY 

ADM.' 

(Not yet passed on by Inspectors.) 

' .; 

No. R. 

A B ' C D • E —F-— G H J 

• Administration 

Protested 

T. 

3 

9 

33 

. ' 46 





590 


Senate Judiciary Committee. 


Exhibit 150-1. is as follows: 

PROXY PROTESTED BY INT. COM. 
(Not jet revised bj Inspectors.) 

No. S. 

A B C D E.E G H 

M. 

Intnl. P. H. Com. 

Protested. 

P. 

63 

69 

75 

76 


Exhibit 150-J. is as follows: 

PROXY PROTESTED BY INTL. COM. 
(Not jet revised bj Inspectors.) 

No. S. 

ABODE —F— G II 

M. 

Intnl. P. H. Com. 

Protested. 

P. 






• Testimony of Mr. Lawshe. 
Exhibit loO-K. is as follows: 



PROXY PROTESTED BY ADM. TICKET. 

(Xot yet revised by Inspectors.) 

Xo. S. 

A B C D E —E— G II J 

Administration 

Protested 

, . \ * ' T. 

69 
( 76 
85 

Exhibit 150-L. is as follows: 

MAIL VOTE CHALLENGED BY IXT. COM. 
(Challenge rejected by Inspectors.) 

Xo. Q. 

A B — 0 D E F G H J 

In till. P. II. Com. 


Protested. 


P. 

Inspectors’ Classification. 

o 

o 

A. 

12 - ‘ 


33 


50 

i 

\ 

• 


Exhibit 150-M. is as follows: 


BALLOT DELIVERED BY IXT. COM. PROTESTED BY 

ADM. 

• , 

(Challenge sustained by Inspector.) 
ABCD-EFGHJ 






Senate J udiciaey Committee. 



Inspectors’ 

Classification 

E. 


Administration 

Protested 

T. 

3 

6 

0 

19 

20 
39 
43 


Exhibit 150-X. is as follows: 

PROXY PROTESTED BY IXTL, COM. 
(Challenge sustained by Inspectors.) 

No. S. 

A B C D E F G H - J 

M 

Intnl. P. H. Com. 

^ * ■* 

Protested. 


p. 

' 

63 - 

Inspectors’ 

69 

Classification 

75 

L. 


Exhibit 150-0. is as follows: „ 

s 

PROXY PROTESTED BY ADM. TICKET. 


(Challenge rejected.) 

i 

Xo. S. 

ABCDEEGHJ 

Administration 
Protested 
. ' T. 

Inspectors’ 63 

Classification . 69 

D. 76 




593 


Testimony of Me. Lawsiie. 

» i 

j 

Q. Now I show you a paper entitled a Inspectors’ Personal 
Stamps,” and ask you what that is ? A. The large letter “A” 
and the large letter “ B ” would indicate, either of those large 
letters appearing on the ballot would indicate that the same had 
been classed as “A” or “ B ” by the inspectors, as a final classifi¬ 
cation, subject of course to the elimination of duplicates. “D” 

. and “ E ” would indicate they were good or had, respectively, for 1 
the International Committee candidates. “ G ” and “ H ” good 
and bad splits, respectively. 

Q. Do those stamps show the situation after the challenges 
had been passed upon ? A. Yes, sir. These were put on as we 
passed on challenged votes. Class “ C ” would become “A,” “ B,” 
and so on, and J would become “ G,” “ II.” We used “ J ” in¬ 
stead of “ I ” as we thought “ I ” would be confusing. 

Q. Therefore, as I understand, the large letters A, B, D, E, G, 
H, K, L on the table called Inspectors’ Personal Stamps, which 
I shall ask to be marked Exhibit 151, indicate the determination 
of the inspectors as to challenged votes — is that correct ? A. 
Yes, sir; and K and L referring to the proxies. 

Q. Now I show you this paper'and ask you what that is? 
A. The tally card which we pinned on to the outside of the 
various bundles of votes. 

Mr. Mayer.— I offer it in evidence. Marked Exhibit 151. 

Exhibit 151 is as follows: 


INSPECTORS’ PERSONAL STAMPS. 


Inspectors Classification 

r - ■ ' i a 

• 

For Adm. 

Good 

Inspectors Classification 

Bad 

B 

Inspectors Inspectors 

For Inti. Com. 

Classification Classification 

Good 

D • E 

Bad 

Inspectors Inspectors 

Split 


>4 

Senate Judiciary 

Committee. 

Classification 

Classification 

Good 

G 

H 

Bad 

Inspectors 

Inspectors 

For Adjusted Adm. ticket 

Classification 

Classification 

Good 

K 

L 

Bad 


Note.—A ll subject to further examination as to qualification 
of voter. 


Q. Now, explain it briefly. A. Tlie division refers to the 
letter P, Q, B or S as I have heretofore explained, the state or 
country from which it came, and the class would he indicated by 
A, B, C, D, E, F, G, H and so forth, and the bundle number 
is our own number, a serial number so that we can keep an index 
of the numbers, and the original number of ballots or proxies in 
the bundle was generally 250". Then below are some blank spaces 
for adjustment, as for instance subtract 1 and transfer it to bundle 
so and so; or add one, being an extra ballot contained in the en¬ 
velope and detached. - < 

Q. What does the. word “ Initials ” mean? A. It means init¬ 
ialed by the person making the transfer. 

Q. And the diagram in the upper right hand corner is what ? 
A. It contains spaces in which a record of the checkings against 
the list can be made. The clerk handling the bundle on the first 
check inserts his initials in the first space, and those handling it 
on the second check do likewise on the second line. In that way 
we are able to follow a bundle through all of the hands of the 
different persons who handle it. 

Mr. Mayer. — I offer it in evidence. 

Beceived and marked Exhibit 151, as follows: 


TALLY CARD 

LIST CHECKED 

/ 

• 1st Check. Completed 


No. 1 

Division 

No. 2 % 

State or Country Class 
Bundle No. 


Original No. of Ballots 

or proxies in bundle. 




595 


Testimony of Mr. Lawsiie. 
ADJUSTMENTS. 

or Number 

— From or To Initials Initials 

or or Number 

— From or to 
Initials. 

Q. Now I show you a paper which I shall ask to have marked 
Exhibit 153. I ask you if that contains miscellaneous stamps? 
A. Yes, sir. 

Q. And those stamps explain themselves ? A. Yes. If not the 
writing in ink will sufficiently explain their uses and character. 

Q. .Now “ This policy was in force from on or before April 
27th, 1906, to December 18th, 1906, inclusive.” What is that? 
A. That is a stamp, Mr. Mayer — or I should say that all three 
of the stamps on the top line are stamps used by the companies’ 
employees to indicate the status of the case, where we have set 
down the numbered slips to which I have previously referred. 

Q. And the three statements stamped at the top of the sheet to 
which you have referred are as follows: “ 1. This policy was in 
force from on or before April 27, 1906, to December 18, 1906, in¬ 
clusive.” “ 2. The above numbered policy was not in force April 
27th, 1906.” “ 3. Policy lapsed prior to December 16, 1906.” 

Is that correct? A. Yes, sir; that is correct. 

Mr. Mayer.— I ask to have this paper marked in evidence. 
Paper marked Exhibit 153, and is as follows: 

# 

MISCELLANEOUS STAMPS. 

Used on Slips Sent dp bit Company on Request for Infor- 

* 

MATION. 

This policy was in force from on or before April 27/06 to Dec. 
18/06 inclusive. 

The above numbered policy was not in force April 27/06. 
Policy lapsed prior to December 18, 1906. 

Used as tables where qualification is checked. 

Unable to locate on list. 

Policy number compared and found correct. 


596 


Senate Judiciary Committee. 


Sundry. 

Signature of Assignee. 

Not on File. 

Duplicate. 

1129. 

Blanket Ballot No. Class 

{Red Star.) 


Q. Now what is this envelope and paper which I now hand you ? 
A. It is one of the official statements sent to policy-holders by the 
company under section 91 of the Insurance Law, together with an 
official envelope provided for the voter to return his ballot in. I 
have brought this up to show you how we attached them together 
and I have marked this one “ Void Sample.” 

Q. And does it also contain a rubber stamp on the back ? A. 
Yes, sir. 

Mr. Mayer.— I ask to have it marked in evidence. 

Marked Exhibit 154, and the same is as follows: 

OFFICIAL STATEMENT UNDER SECTION 94 OF THE 
INSURANCE LAW OF CANDIDATES NOMINATED 
AND OF PERSONS APPOINTED TO RECEIVE 
PROXIES FOR THE ELECTION OF DIRECTORS IN 
THE NEW YORK LIFE INSURANCE COMPANY. 
THIS STATEMENT MAY BE EXECUTED AND RE¬ 
TURNED AS A BALLOT. 


The Election of Twenty-four Directors of the New York 
Life Insurance Company will be Held at the Home 
Office No. 346 Broadway, New York City, U. S. A., 
December 18, 1906. 

Administration Ticket. 

John E/ Andrus, Yonkers, New York. 

John Claflin, Morristown, New Jersey. 

James H. Eckels, Chicago, Illinois. 

Julius Fleischmann, Cincinnati, Ohio. 

Ewald Fleitman, New York City, New York. 





f 


Testimony of Me. Lawsue. 


597 


Thomas P. Fowler, New York City, New York. 

David R. Francis, St. Louis, Missouri. 

Woodbury Langdon, New York City, New York. 

Robert J. Lowry, Atlanta, Georgia. 

Clarence H. Mackey, Roslyn, Long Island, New York. 
Seth M. Milliken, New York City, New York. 

John G. Milburn, New York City, New York. 

George A. Morristown, New York City, New York. 
Henry C. Mortimer, New York City, New York. 
Alexander E. Orr, Brooklyn, New York. 

Augustus G. Paine, New \ r ork City, New York. 
William B. Plunkett, Adams, Massachusetts. 

Anton A. Raven, Brooklyn, New York. 

John Reid, Yonkers, New York. 

Fleming H. Revell, New York City, New York. 

George F. Seward, East Orange, New Jersey. 

Eldridge G. Snow, New York City, New York. 

Hiram R. Steele, Brooklyn, New York. 

Louis Wagner, Philadelphia, Pennsylvania. 

(Marked in blue pencil “ void sample.”) 

• " 

International Committee Ticket. 

John T. Christie, Troy, New York. 

Frederick J. Clarke, Kingston, New York. 

Frederick R. Coudert, New York City, New York. 
John I). Diffenbaugh, Monmouth, Illinois. 

William F. Draper, Hopedale, Massachusetts. 

John W. Dunn, New York City, New York. 

John Dunn, Jr., Syracuse, New York. 

Stephen Farrelly, New York City, New r York. 

DeWitt Clinton Flannagan, New York City, New York 
George W. Guthrie, Pittsburgh, Pennsylvania. 

J. S. Ilarmood-Banner, Liverpool, England. 

Minor C. Keith, New York City, New York. 

Hugh Kelly, New York City, New York. 

Francis II. Leggett, New York City, New York. 

Adolph Lewisohn, New York City, New York. 
Frederick B. Lynch, St. Paul, Minnesota. 

Leopold Mabilleau, Paris, France. 

Isidor Newman, New Orleans, Louisiana. 

James II. Nichols, Hartford, Connecticut. 


598 


Senate Judiciary Committee. 

George H. Robinson, New York City, New York. 
Edward B. Smith, Philadelphia, Pennsylvania. 
Edward B. Stahhnan, Nashville, Tennessee. 
William C. Van Arsdel, Indianapolis, Indiana. 

1 lor ace Wh ite, New Y ork C i ty, N ew Y ork. 


Dated at 


, 1906. 

Signature of Policy-holder. 


Signed in presence of: 


Signature of subscribing witness. 

Policy number. 

Names of Directors Whose Terms Expire. 

Thomas A. Buckner. 

John Claflin, 

James H^ Eckels, 

Julius 'Fleischmann, 

Robert J. Lowry, 

Clarence H. Mackey, 

Seth E. Milliken, 

George A. Morrison, 

Edmund D. Randolph, 

Anton A. Raven, 

John Reid, 

Fleming H. Revell, 

IJwald Fleitman, 

, Thomas P. Fowler, 

Darwin P. Kingsley, 

Woodbury Langdon, 

Henry C. Mortimer, 

Alexander E. Orr, 

Augustus G. Paine, 

William B. Plunkett, 

Eldridge G. Snow, 

Hiram R. Steele, 

• Louis Wagner, 

Rufus W. Weeks. 


i J 






Testimony of Me. Lawsiie. 


599 


Names of Persons Appointed to Receive Proxies. 

Rowland G. Hazard, Alba B. Johnson and Horace E. Burton, 
address care of Hew York Life Insurance Company, Ho. 346 
Broadway, Hew York City, have been appointed to receive proxies 

for the Administration Ticket. 

/ 

Harlow H. Higginbotham, Richard Olney and Charles Emory 
Smith, address Ho. 30 Broad Street, Hew York, have been 
appointed to receive proxies for the International Committee 
Ticket. 

a • 
Insteuctions foe Use of Statement as a Ballot. 

Each policy-holder whose policy is in force on the above date 
and shall have been in force one year prior to December 18, 1906, 
will be entitled to vote. The law also provides that persons having 
a right to vote by virtue of any contract made prior to the enact¬ 
ment of the statute (April 27, 1906), which contract shall remain 
in force till the date of the election, shall be entitled to vote. 

Unless the policy shall have been assigned by an assignment 
absolute on its face prior to June 18, 1906, the person upon whose 
application the policy shall have been issued, or.if the application 
be signed by more than one person, the person whose life is insured 
shall be entitled to vote. In case a policy shall have been assigned 
as aforesaid the assignee shall be deemed a policy-holder entitled 
to vote, provided his signature, either attested by the assignor or 
acknowledged in like manner as in case of a deed to be recorded 
in Hew York, shall have been filed in the home office. 

The polls open at ten o’clock in the forenoon and close at four 
o’clock in the afternoon of December 18, 1906. Ho ballots re¬ 
ceived by mail or delivered at the office of the company or offered 
personally or by proxy after the polls are closed shall be^counted. 

To rote in person the policy-holder may attend at the home 
office of the company at Ho. 346 Broadway, in the city and State 
of Hew York, on December 18, 1906, between the hours of 
10 a. iri. and 4 p. m., during which time the polls will be open, 
and offer personally a ballot duly executed by him, or he may 
at any time before the polls are closed December 18th next, per¬ 
sonally deliver his ballot at said home office enclosed in a sealed 
«/ 

envelope- as hereinafter provided. 

To vote by mail a policy-holder must indicate the name of the 
nominee t>r nominees for whom he desires to -vote, or strike out 
the name or names of those for whom he does not desire to vote, 


600 


Senate Judiciary Committee. 


upon the foregoing statement or must otherwise suitably indicate 
in writing the name, of the nominee or nominees for whom he 
desires to vote; and must sign the said statement or other writing 
in his own handwriting in the presence of subscribing witness, and 
the statement when so marked and signed or such other writing 
when signed, shall become a ballot. 

Such policy-holder must enclose the statement so marked or 
such other writing duly executed, in the enclosed return or a 
similar envelope, upon which must be written his signature in his 
own handwriting, arid his post-office address and the number of 
at least one policy held by him. Such envelope containing the 
ballot, sealed and post-paid, may be mailed by the policy-holder 
to or may be delivered at the home office of the company. 

Xo policy-holder may vote for more than twenty-four directors. 
Only candidates nominated as shown in this statement can be 
voted for. All ballots upon which the intent of the policy-holder 
does not fairly appear shall be void. 

Instructions for tiie Use of a Proxy. 

A policy-holder has the right to vote by mail or by proxy or in 
person. _ 

To Vote by Proxy .— Any policy-holder may vote by proxy 
executed to any person whether designated in this statement or 
not. The execution of a proxy shall be attested by a suscribing 
witness and the proxy shall set forth the' number of at least one 
policy held by the person giving it. When executed the proxy 
should be sent to the person or persons appointed to vote there¬ 
under. 

Uo votes shall be cast at such election under any proxy executed 
prior to ijie 18th of October, 1906. A proxy shall be used only 
at such election'or any adjournment thereof, and may be revoked 
by the policy-holder giving the same at any time prior to the 
opening of the polls upon the day of such election. 

Stamp on back of ballot as follows: 

> ^ 

HO. P. 

ABCDEE GHI 

(A marked through with blue pencil.) 

Intnl. P. II. Com. ~ y$ t 

Protested 

X ' ^H|l 

Envelope attached — reads as ^follows: 


1 


Testimony of Mk. Lawsiie. 601 

Ballot for Directors ' x 


Policy-holder 


Add ress 


Xumber of policy 


Yew \ork Life Insurance Company, 

846 Broadway, 

New York City, 

New York, 

U. S. A. 

(Envelope received unsealed.) 

Q. Now, Mr*. Lawshe, in the matter of examining into addresses, 
will you state whether or not the change of address is frequent ? 
A. 4 he change of address lias given us much difficulty, because 
as I am informed hv the secretary of the company, the addresses 
of voters in that company change at the rate of 500 to 600 a day. 
The list which we are furnished with is a substantial reproduction 
of the list which was tiled in Albany, in the Insurance Department 
last summer, in compliance with the law— 1 July 18th I think the 
law prescribed as the date for the filing; and of course between 
that time and December 18th, when the last ballots came in by 
mail, a large number of policy-holders had changed their ad¬ 
dresses without previous notice to the company, with the result 
that we would find perhaps a man’s name in Montana and the vote 
might come from Missouri or Iowa. 

Q. And that required particular investigation? A. Yes, sir; 
wherever the address differed from that in the book of voters fur¬ 
nished us we sent down stairs and bv means of the policy number 
we at once traced him that way. 

Q. You have been getting along with how many inspectors lat- 
terlv. A. Three since the first week in February. 

V 

Q. And you have been working until what hour at night ? A. 
Our regular hours, that is the hours the clerks worked are from 
ten until five; but the inspectors get there before ten, some one 
inspector getting there at nine thirty in order to open up the safe; 







002 Senate Judiciary Committee. 

and we have frequently had to remain as late as half past six or 
twenty minutes to seven to close up at night, in order to get this 
mass of paper back into the safe. 

Q. Have you employed clerical help ? A. We have. 

Q. How much has* it amounted to ? A. I have a chart here. 
Exclusive of the accountant and his two personal assistants, the 
greatest number we have had at one time was 208. I will say 
in that connection, that was during this process I have described 
as the classification; and at that time we had on one side of the 
room sixteen tables in which this classification process was going 
on simultaneously, and on the other side of the room the ballots 
were being classified according to the letters of the alphabet. But 
work as hard as they would at no table were they able to. submit 
to the scrutiny of the watchers more than 2,500 ballots a day. 

Q. Describe those classification tables — or have you already 
described that ? A. I think I have. 

Q. Have the accountants also worked in conjunction with you ? 
A. All the time. 

\ 

Q. What are their names? A. We had Mr. Niven of Touche, 
Niven & Company, we had Mr. J. B. Niven of that company. 

Q. Has he been constantly with you ? A. Yes, sir; throughout 
the early part, but latterly he has been able to devote part of his 
time to other business. But his first assistant has been present 
all the time. 

Q. I show you a photograph.. Do you recognize it? A. Yes, 
sir. 

Q. When was that taken ? A. That was taken about, I should 
say, one month ago. 

Q. And does that show the employees on work in regard to the 
votes ? A. All the persons in that photograph were in our im¬ 
mediate employ. That does not show all of the room or all of the 
employees. 

Mr. Mayer.— I ask to have it marked. 

(Marked Exhibit 155.) 

Q. Now, before I ask you any general questions, have I omitted 
to call your attention to any specific matter of detail or process? 
A. No, sir; except that I might add now that referring to the 
condition of these ballots when they came to us, as indicating the 
lack of knowledge on the part of the voters, that in a large num¬ 
ber of instances we received checks, money orders, etc., in pay¬ 
ment of premiums; and a good many enevelopes which bore the 




Testimony of Mr. Lawsttf. 603 

indorsement “ Ballots for Directors of the Company ” contained 
simply letters which were addressed to the company, and they 
were retained by the Superintendent until the day of election. 

Q. Has the company been compelled to work overtime in several 
departments ? A. Yes, sir; our demands on the company for in¬ 
formation in the index department and in the brief department 
which I have already described, and also in the file department, 
where the original applications are on file, the work has been so 
heavy there that five departments have worked overtime; and in 
the so-called brief department, which is the one to which we sent 
our slips for verification of policy numbers, they worked day and 
night; they put on a shift at night to replace the cards which were 
drawn out during the day. 

Q. Now from the experience you have had what is your opinion 
as to whether the system which you have devised has dealt ade¬ 
quately with the problem in hand ? A. The system has been de¬ 
veloped and' modified and changed as we went along. It is the 
result of our experience, and we have given it our best efforts; and 
I can think of no radical change which would be an improvement. 

Q. Now, in your opinion, state whether or not it would have 
been possible to devise a system prior to your actually undertaking 
the work and your actual contract with it ? A. I do not see that 
that would have been possible until we were confronted with the 
actual circumstances in which we found ourselves after the day of 
election, because nobody knew how many votes would be cast at the 
offices of the company in person. Two great ballot boxes, as large 
as this desk (indicating), were prepared to receive those votes over 
the counter, and we got a paltry 360. The system could not have 
been sensibly devised in its minutiae until the day of election. 

Q. Was there any way of ascertaining what challenges would be 
had until the time of the casting of the votes ? A.' Save by reading 
the law and speculating as to what people would claim about the 
ballots. 

Q. There was no method of challenging before the day of elec¬ 
tion? A. No, sir; and a great many of the grounds of challenge 
had reference to the condition in which the ballots were; and that 
could not have been discovered until the day of election. 

Q. From your experience would you say it was advisable to have 
a small board or a large board — 10, 20, 30 or 40' inspectors? 
A. I think a large number such as you have last named would have 
been a serious handicap, rather than a help. Just what would be 



604 


Senate Judiciary Committee. 


the ideal number it is hard to say. We had five inspectors and the 
absence of two of them has proved to be a serious handicap, but I 
think five is as large a number as could conveniently work together 
in such a situation as this is. 

Q. What do you say with reference to the wisdom or advisability 
of your having employed accountants ? A. I think we would have 
been utterly at sea without an accountant, because the figures in the 
bookkeeping entailed in keeping track of those various bundles of 
ballots from the various states and from foreign countries, besides 
keeping them in the various classifications which I have described, 
it is not a small task and requires expert handling. 

Q. In the event that the result of the vote, in whole or in part, 
should be attacked in court, is it your opinion that information as 
to the vote is readily obtainable for the information of the court ? 
A. Assuredly. The ballot bears on its back these various stamps, 
which when explained will indicate clearly the various processes 
through which that vote went and the various decisions made with 
respect, to it. 

Q. Is it fair, then, to state the court will be fully advised in 
the event of any court proceedings as to the process and determina¬ 
tion of the inspectors, from an inspection of the ballots, aided by 
the key of explanation ? A. Given an explanation of the process, 
the court can scrutinize a given ballot and trace the course through 
which that ballot went. 

Q. Now, 4rom such experience as you have had in this matter, 
would you say that it is wise, as distinguished from passing upon 
the law of the case, would you say it was wise that the appeal from 
any determination of the inspectors should*be made direct to the 
court ? I am not asking you for any theory as to the law, or what 
the law might be, but as to the situation specifically found here ? 
A. The situation as specifically found here, it seems to me, per¬ 
mits of no appeal save to the courts, because an appeal to any other 
person would be but a preliminary step to an ultimate appeal to 
the court, which would follow — the law being new. 

Q. During the process you have described, and from the time 
of the election, December 18th, state whether or not Mr. Kelsey 
visited you or your inspectors while the canvassing was going on ? 
A. Mr. Kelsey was present all day on December 18th, the day of 
the election, he was there all day long; and immediately following 
that he was in daily attendance for several days, and during the 
early stages of the count he was present two or three times a week, 


Testimony of Me. Lawsiie. 


605 


sometimes oftener, and latterly he has been there on an average 
of two times a week. We have consulted Mr. Kelsey frequently. 

I may say we deemed ourselves primarily responsible; that gen- * 
erally we have agreed with him, but sometimes not. We did not 
feel ourselves bound by Mr. Kelsey’s opinion if we, as inspectors 
disagreed with him. 

Q. You regarded yourselves as the sworn officers charged with 
the duty of carrying out this law, as far as it implied to that 
work? A. Yes, sir. 

Q. Was there any argument before you by any attorneys? A. 
Yes, sir; there was extended argument, lasting nearly a whole 
day, between Mr. McIntosh, General Solicitor of the Hew. York 
Life Insurance Company, and Mr. Marshall, of the firm of 
Guggenheimer, Untermeyer & Marshall, on behalf of the* Inter¬ 
national Policy Holders’ Committee. They submitted elaborate 
briefs, and thereafter we considered the same, but did not pass on 
all the questions raised until they were raised specifically in con¬ 
crete instances, as we'did not deem it to be incumbent upon us 
to pass on questions until they actually arose. 

Q. State in a general way to what questions these arguments 
were directed? Were they directed to the validity of the ballots? 

A. Yes, sir; and it was argued that we were a tribunal, a judicial 
tribunal, empowered to take testimony in regard to specific bal¬ 
lots. That was urged before us with great vigor. 

Q. That you have power to take testimony? A. Yes, sir. 

Q. What was your decision in that regard ? A. We have never 
been called upon to decide it, as no one has asked us to take their 
testimony, and no affidavits have been presented to us. 

Q. What are the names of the other two inspectors now remain¬ 
ing? A. "Robert Seldon Huse, who is Secretary of the Inspectors, 
and Alphonse Koelble. 

Q. How taking the total vote are you able to state from your sum¬ 
maries the number of domestic votes cast and the number of for¬ 
eign votes? A. I can. 

Q. Please do so. A. Of the four hundred and seven odd thou¬ 
sand votes, there Avere 339,795 domestic votes, and there were 
67,700 odd from abroad.- If it may be of interest I may say that 
we had upwards of 8,000 votes from’ Russia, we had 15,000 from 
France — those numbers include proxies — in each instance; 
5,000, more or less, in fact there were more than 5,000, from Spain 
and 3,000 from Italy; and we had some from Japan, China and 




606 . 


Senate Judiciary Committee. 


India. Our votes were in all languages. Some of them were 
carefully prepared and others were the work of illiterates, and 
were very difficult to decipher. 

Q. Now, in your opinion, will the results when concluded be 
an accurate ascertainment of the vote as cast and tested by your 
rulings on the various questions raised ? A. I feel very sure that 
our result when announced will stand any test to which it may 
be subjected. I say that with some degree of modesty. A e have 
worked very hard over it, and we think it will hold water. 

Q. Now just this general question: Are there a number of 
details which you have not gone into to-day ? A. Oh, yes. It will 
* take a long time to give them all. 

Q. But have you described substantially in outline your methods 
and the more important instances that have occurred ? A. Yes, 
sir. But there is one more thing which I should speak about, if 
it is not too late to do so now. 

Q. Go on. A. The situation in the New York Life Insurance 
Company is complicated by the fact that one of the candidates 
died after the mailing by the company of the official statements 
to the policy-holders throughout the land and before the day of 
election; and the administration in compliance with the law nomi¬ 
nated a substitute candidate in his stead; hut all of the official 
statements which were voted and became what we call “ ballots 
sent by mail,” voted in.favor of the dead man, whereas the com¬ 
pany’s proxies were voted for the 23 remaining candidates, plus 
the substitute candidate. So that the certificate of the result in 
that company would be complicated by that feature. 

Q. Now there were how many on each ticket ? A. Twenty-four. 

Q. Making a total of 48 names ? A. Yes, sir. 

Q. Were you subpoenaed to appear here to-day ? A. Yes, sir. 

J. Bayard Backus, recalled. 

# , t 

By Mr. Mayer: 

Q.-I think I asked you before, but it has been suggested that 
I may have omitted it, so I repeated the question: Has your Board 
had occasion to compare the handwriting on the ballots with the 
handwriting of the policy-holder as it appeared on the, papers filed 
with the company? A. You mean his handwriting as it appeared 
on his original application. 

Q. Yes. A. We have been requested to-do so in some causes. 


Testimony of Mr. Appleton. 


607 


Yl e have found that frequently the application had been written 
twenty or thirty years prior to the date of the election, and a 
man’s handwriting has frequently changed very much in that time. 

Q. But you have had occasion to elo that,— compare hand¬ 
writings? A. Yes, sir. • 

The Chairman.—-Ye will take a recess until 8:30 this evening, 

O' 

and continue the session until 12 if it is desired. 

Recess Until 8:30 p. m. 


Evening Session, 8 :30 p. m. 

• • April 11 , 1907. 


The Chairman,— The meeting will come to order. 

« 

Henry D. Appleton, called as a witness, being duly sworn, 
testified as follows: 


By Mr. Mayer: 

Q. Mr. Appleton, what is your present position in the Insur¬ 
ance Department ? A. Second Deputy Superintendent. 

Q. And how long have you been such ? A. For about ten years. 

Q. How long have you been connected with the Department? 
A. Nearly twenty-four years. 

Q. In what capacity did you first enter? A. Certificate of Au¬ 
thority Clerk. 

Q. And have you been promoted from time to time? A. Yes, 

sir. 

Q. Now, since Mr. Kelsey has been Superintendent who has 
'opened the mail, other than personal letters directed to him ? A. 
I have, sir, when present. 

Q. Is the Department sub-divided? A. Yes, sir; it is sub¬ 
divided into bureaus. 

Q. What are they briefly ? A. The Actuaries Department, the 
Third Deputy and Chief Clerk, taking charge of the assessments 
and the fraternals, and the filing of incorporation papers, the 
Cashier’s Department, the General Office, where all orders are 
referred; the Statistical Department, where all references to state¬ 
ments are made, and the Order Department. Those are about the 
main bureaus of our Department. 








608 Senate Judiciary Committee. 

\ $ 

Q. Now did you in the performance of your duty distribute 
the letters to these various departments or bureaus? A. Yes, sir. 

Q. And what record, if any, is made of a letter thus opened by 
you ? A. The mail in the morning is opened, every letter is 
entered on the record book; the mail is then marked for the dif¬ 
ferent bureaus, for the person in charge of the bureau; those 
letters are stamped showing their receipt; the letters are attended 
to bv the different bureaus; they are then marked "‘Answered,” 
and then go to the filing clerk, and they are endorsed with the 
filing stamp, and they are then checked back on the original book 
of entry, the record book, and to each letter the answer is attached, 
the manifold or carbon copy, and it is then put into the card 
index system, each company having its own folder subdivided into 
different departments for the company. 

Q. Who is in charge of the Actuarial Department ? A. Mr. 
Paterson. 

Q. Who is in charge of the Fraternal Associations’ Assessment 
Orders and the filing of incorporation papers ? A. Mr. Behan. 

Q. Who is in charge of the annual statement returns ? A. Mr. 
Crippen. 

Q. Who is in charge of the certificates and documents required 
of companies and others ? A. Mr. Cadman. 

Q. Who is in charge of letters in reference to fees and taxes ? 
A. Either the cashier, Mr. Wilkins, or the bookkeeper, Mr. Meany. - 

Q. Who is in charge of letters relating to annual reports ? A. 
Mr. Phillips. 

Q. And the general mail is attended to by you ? A. Yes, sir. 

Q. Do you have any instructions from tlte Superintendent in 
- regard to letters received relating to elections of trustees and 
directors of mutual companies, as provided by Section 94? A. I 
had instructions from Mr. Kelsey that all mail applying to Sec- ' 
tion 94 be placed on his desk. , 

Q. Were those instructions obeyed ? A. Yes, sir. 

Q. Can you state whether all such mail was placed on his desk? 
A. I can. 

Q. Was it? A. Yes, sir; it was. 

Q. What instructions have there been as to calling the atten¬ 
tion of the Superintendent to letters out of the ordinary or 
letters requiring a ruling? A. Every letter out of the ordinary 
requiring a ruling was brought to Mr. Kelsey’s attention. As 
far as I was concerned, in answering the general mail it was 


r 


Testimony of Mr. Appleton* 


GOD 


customary for me every morning to take the letters of that char¬ 
acter in to Mr. Kelsey, calling his particular attention to them, 
and he would discuss the features of the letters with me, and in 
some instances he would keep the letters and reply to them him¬ 
self, and in some instances he would instruct me as to the char¬ 
acter of the reply which he wished prepared. That reply was 
submitted to him, and in many cases it was modified by him. 
All rulings since his administration, to the best of my knowledge, 
every ruling I have had anything to do with, has been made by 
Mr. Kelsey. 

It is customary in handling the mail that the division or bureau 
to which it is referred, or the party to whom it is marked, for that 
person to place on the letter his initials, as a means of identifica¬ 
tion, so that we can take every letter that has come to the De¬ 
partment, and we can see its references, and who prepared the 
answer and who was responsible for the reply. 

Q. In cases where you have received the views or instruction 

of Mr. Kelsey- A. If Mr. Kelsey told me to prepare a letter 

along certain lines and I prepared that letter, even though he 
directed me to prepare that letter, I placed my initials on it. 

Q. That would indentify you with the letter ? A. That would 
identify me with the letter. 

Q. Now, what does section 103 refer to — what subject? 
A. Section 103 ? It. relates to the new publicity requirements 
for the annual statements of life companies. 

Q. In whose department were those letters attended to? A. 
The majority of those letters I looked after. 

Q. State whether or not you consulted in regard to those let¬ 
ters, in so far as any ruling was concerned, with Mr. Kelsey ? 
A. Invariably. 

Q. Was there any exception? A. None whatsoever. 

Q. Now, where the letter did not involve a ruling and upon 
your examination you regarded it as important, or out of the 
regular routine, what was your course in relation to a letter which 
related to section 103? A. All of the letters? 

Q. Under section 103 ? A. All of the letters, Judge Mayer, 
under section 103 were matters that were new to the Department, 
and for that reason all of those letters were brought to the atten¬ 
tion of the Superintendent. Occasionally letters came in relating 
to section 103 where a ruling had been made for some particular 
company, and the same question was asked by another company; 



Bio 


Senate Judiciary Committee. 


and in those instances, frequently the answer was prepared by re¬ 
ferring to the ruling made for the other company, and sending a 
copy in reply. 

But even those letters were brought to the attention of the 
Superintendent, and he was advised and knew the reply which 
was made was identical to the reply made to another company on 
that same question. 

Q. There was as a matter of fact some rulings made by the 
Attorney-General? A. How is that? 

Q. I said there were some changes made by the Attorney-Gen¬ 
eral in the rulings, some of them. A. Yes, sir; there were some 
changes and modifications in consequence of the new law. 

Q. How in regard to the important letters relating to the San 
Francisco conflagration, what was the course in reference to that ? 
A. All of the letters relating to the San Francisco conflagration 
had the personal attention of the Superintendent; many of those 
letters were answered directly by the Superintendent. The policy 
of the San Francisco conflagration — I mean the handling of it 
—- was the policy of Mr. Kelsey. 

Q. How there were certain letters introduced in evidence, and 
my recollection is they were around Exhibits 118 and 119, re¬ 
garding the correspondence forwarded to Mr. Kelsey by the Gov¬ 
ernor and the answers by Mr. Kelsey? A. Yes, sir. 

Q. Did you have anything to do with those? A. Ho, sir; 
nothing whatever; they were replied to by the Superintendent. 

Q. How how about the letters involving any question of judg¬ 
ment, ruling or investigation relating to the following subjects, 
which I will state in a group for purposes of brevity: Standard 
Policy Provisions; Limitation of Expense of Management; Re¬ 
quirements as to Form of Life Policy? A. All of those sub¬ 
divisions were marked for Mr. Paterson, the Actuary in the De¬ 
partment, and Mr. Paterson consulted with the Superintendent, 
I believe. 

Q. That was not immediately under your charge? A. Ho, sir. 

Q. Those letters were simply assigned to Mr. Paterson in the 
first instance? A. Yes, sir; they were assigned to Mr. Paterson 
because they related to actuarial questions. 

Q. How, as far as you know, Mr. Appleton, are you able to 
state whether or not a single letter sent out from the Department 
involving a ruling 01 * a question of departmental policy was so 
sent out without the knowledge of the Superintendent? A. 
Hever; in a single instance. • 


Testimony of Mr, Appleton. 


6ll 


Q. Or without his personal attention ? A. Nor without his 
personal attention. 

Q. Now, Mr. Appleton, during your many years of experience 
in the Insurance Department have you been familiar with the 
rulings made by the Department ? A. I have; yes, sir. 

Q. Now as compared with other administrations, and in view 
of the requirements of the new law, and the San Francisco situa¬ 
tion what would you say in respect to the number of questions and 
the number of rulings presented to and made by Mr. Kelsey, as 
compared with other administrations ? A. All of the provisions 
of the new code necessarily required rulings by the Superintend¬ 
ent; those were all new matters and required new rulings. The 
San Francisco conflagration was something that we had never had 
to contend with before, or anything like it in such magnitude. Of 
course we had the Baltimore conflagration a few years ago, but 
that was nothing in magnitude to compare with the San Francisco 
disaster. In that particular the rulings made by Mr. Kelsey were 
in excess of any previous administration. The general rulings 
that always have to be made by the department in relation to com¬ 
panies, and departmental policy, they have kept up just the same 
under Mr. Kelsey’s ten or eleven months as they did in any other 
previous ten or eleven months under any administration. 

Q. By virtue of the circumstances, related, has the number of 
rulings under Mr. Kelsey exceeded the number of rulings in 
previous administrations? A. Yes, sir; far in excess. 

Q. Far in Excess ? A. Yes, sir.. 

Q. Now something was said about getting up a comparative 
table for the information of this committee? A. Yes, sir. 

Q. Have you been able to get up such a comparative table? 
A. No, sir. It is impossible to get up such a comparative table 
for the reason that we have only had our card index system for 
about five years, and we have only had the cross index system for 
the past year; and there is but one way to get the original ruling, 
and that would be to go to the original letters, that is in speaking 
of the former administration; but with this cross index system 
we are able to check up the rulings and furthermore under the 
new law a record as kept of the new rulings so that they are all 
together. 

Q. So that under Mr. Kelsey’s administration you have com¬ 
plete record system ? A. Yes, sir. 

Q. And one that may be readily referred to? A. Yes, sir. 


612 


Senate Judiciary Committee. 


Q. And notwithstanding the fact that you are not able to get 
up these tables, are you able to say that the problems and rulings 
made under Mr. Kelsey’s administration were greatly in excess 
of those of any other administration since you have been in the 
Department ? A. Yes, sir; far in excess, by reason of the pro¬ 
visions of the new law. 

Q. You are familiar with the requirements of section 103 ? 
A. Yes, sir. 

Q. And you are familiar with the blank which has been pre¬ 
pared pursuant to that law? A. Yes, sir. 

Q. How in that respect were there many consultations or few 
with Mr. Kelsey ? A. Constantly consultations with Mr. Kelsey. 

Q. And are you able to say who finally decided the form of 
that statement ? A. Mr. Kelsey always. 

Q. And are you able to say whether there were presented to 
him different suggestions of different forms from different 
sources ? A. There were ? 

Q. From a number of sources? A. From quite a number of 
sources, suggestions were presented, and particularly in connec¬ 
tion with the Gain and Loss Exhibit. 

Q. Did Mr. Kelsey make any suggestion in regard to the Gain 
and Loss Exhibit? A. He did. I say, he made suggestions him¬ 
self. Mr. Kelsey looked over the different propositions which 
were made and he selected what he thought was the better and he 
gave directions for following out along those lines, and at the 
final conference in the Department which lasted several days, that 
was before the Washington Convention, when Mr. Kelsey was 
present at all the consultations he took an active part as to the 
Gain and Loss Exhibit. 

Q. Whose suggestion did Mr. Kelsey adopt as the basis of that 
exhibit? A. Mr. Wolf, an actuary in the city of Hew York. 

Q. An independent actuary? A. Yes, sir. 

Q. State whether or not you were instructed to develop the 
exhibit upon that basis ? A. I was. 

Q. Did you do so? A. Yes, sir. 

Q. Did you submit that to Mr. Kelsey? A. Yes, sir. 

Q. And after that was adopted were there any changes or sug¬ 
gestions made by Mr. Kelsey? A. Oh, yes, there were changes 
made constantly. We had the Gain and Loss Exhibit reprinted 
some five times. 

Q. How, Mr. Appleton, I show you a document entitled “ Hew 
York Insurance Department, Tables Compiled from Annual 


Testimony of Me. Appleton. 


613 


Statements for the Year 1906 as filed by Life and Casualty In¬ 
surance Companies, Assessment Associations and Fraternal 
Orders/ prior to audit by the Department, which document bears 
date of to-day, 1 guess, April 11, 1907? A. Yes, sir; it was 
issued to-day. 

Q. Are you familiar with that document? A. Yes, sir. 

Q. When, if you remember, were you instructed to prepare this 
document ? A. I should say ten days ago, possibly two weeks ago. 

Q. Is that a new document ? A. It is. 

Q* And who instructed you to prepare it ? A. The Superin¬ 
tendent. 

Q. Idas such a document ever been issued before by the De¬ 
partment? A. Yo, sir. 

Q. Yow, without too much detail, will you describe to the Com¬ 
mittee the nature of this document ? A. The desire was to enable 
the insuring public to have before it the figures of the annual 
statements for the past year showing the assets,.liabilities and in¬ 
come and the disbursements, the insurance exhibit and the busi¬ 
ness in the State of Yew York as to the life companies, and for 
the casualty companies, the data which is therein contained; like¬ 
wise the assessment companies and the fraternal orders; and there 
is a letter under even date by the Superintendent explaining these 
tables, explaining that these tables are issued in consequence of 
the delay which will follow in the printing of the Life Report this 
year, owing to the voluminous returns made by the life companies 
under the Insurance Law. 

Mr. Mayer.— I offer that in evidence. 

(Marked Exhibit 156.) 

By Senator Page: 

Q. Mr. Appleton, you have mentioned some convention that 
was held ? A. I mentioned the Yational Convention of Insurance 
Commissioners that was held at Washington. 

Q. When was that held ? A. That was held in October. 

Q. What committee was it that was appointed to meet here in 
June? A. The committee that met in June was the Commit¬ 
tee on Blanks of the Yational Association of Insurance Commis¬ 
sioners. They met in Yew York city. 

Q. And you attended that convention ? A. I did, for the De¬ 
partment. 



614 


Senate Judiciary Committee. 


i 


Q. And you were a member of that committee ? A. I was chair¬ 
man of that committee. 

Q. And Mr. Fletcher of Massachusetts was there ? A. Yes, sir; 
Mr. Fletcher of Massachusetts was there. 

Q. And Mr. Hadley of Michigan and Mr. Yorys ? A. Yes, sir. 

Q. And Mr. Stillwell, representing the Ohio Department? A. 
Mr. Stillwell, representing the Ohio Department, was present at 
the Department here in Albany at a conference held some time in 
September prior to going to Washington. At that time we had 
under consideration the gain and loss exhibit, and the dividend 
schedules. 

Q. What was this committee appointed to do, by the convention 
of insurance superintendents ? A. The committee on blanks, 
Senator, that is a standing committee that meets every year, and 
it has one or two sessions before the convention, and all amend¬ 
ments to the blanks are submitted to that committee and any 
amendment to be passed upon by the convention must be before 
that committee and acted upon by it at least three months before 
the convention. 

Q. And when did you say their convention was held ? A. It 
was held in October. 

Q. I do not mean the convention; I mean this meeting? A. It 
was held in Yew York city the last week in June, if I remember 
rightly. 

Q. And when was the committee in session here at the De¬ 
partment ? A. The whole committee was not in session at the 
Department. There* was Mr. Fletcher, of Massachusetts, and 
Mr. Stillwell, representing Ohio, and myself, representing the 
Yew York Department, and in connection therewith Mr. Paterson 
and Mr. Crippen and the Superintendent. 

Q. This committee, I presume, prepared the draft of the blanks ? 
A. This committee did not prepare the draft of the blanks. 

Q. Did Mr. Kelsey prepare the draft of the blanks and sub¬ 
mit it to the committee? A. When the committee met in Yew 
York city they were advised that Yew York would use the stand¬ 
ard life blank to be perfected by the. committee, but that Yew 
York necessarily would have to use a supplemental blank to carry 
out the provisions of section 103 of the Insurance Law and all of 
the requirements of section 103 were perfected at Albany in con¬ 
sultation with the Superintendent prior to the June meeting with 
the exception that there was no definite plan for the gain and loss 
exhibit and the dividend schedules were not fully completed. 


r~ 1 


Testimony of Mr. Appleton. 


615 


At the meeting in New York when that proposition was made 
many members of the committee stated that it was their desire 
to incorporate in the regular blank many of the features of the 
Armstrong Law, section 103 was canvassed, and they determined 
which of the provisions they desired to have incorporated in the 
regular blank; and then they took the schedules as prepared by 
New York and in my possession, and went over those schedules 
and they accepted those schedules without any amendment; and 
those various schedules were incorporated in the blank. 

The question of the gain and loss exhibit and the dividend 
schedules were discussed there in a general way; but no conclu¬ 
sion was arrived at and they were left open subject to further 
report. And then the committee on blanks had another session 
at Washington commencing on Friday, and we had continuous 
sessions Friday, Saturday, Sunday and Monday prior to the con¬ 
vention of the commissioners. And all that was contained in 
section 103 which was not incorporated in the regular life blank 
was carried by New York as a supplemental blank, known as 
part B of the annual statement. 

Q. Mr. Fletcher has been some years, in the Department of Mas¬ 
sachusetts? A. No, he has not been many years in the Depart¬ 
ment of Massachusetts; he has been connected with the Depart¬ 
ment of Massachusetts about two years; but prior thereto he was 
for twelve or fourteen years with the Maine Department. 

Q. And Mr. Hadley? A. Mr. Hadley I think has been con¬ 
nected with the Michigan Department, for, I should say about 
ten years. Major Brinkerhof, on the committee from Illinois, has 
been connected with the Department of Hlinois for many years. 
It is customary for the committee on blanks to be made up from 
among the delegates to the convention who have the longest service, 
as they must have certain technical knowledge. 

Q. So as to prepare the blanks properly? A. Yes, sir; and 
compare them with the blanks of the previous years. 

Q. I suppose at this meeting which was held the conditions 
obtaining in life insurance were pretty fully discussed by the 
commissioners and by the representatives from other states? A. 
Yes, sir; they were. 

Q. And the method of dealing with the revelations made, that 
was discussed too more or less ? A. Yes, sir. It was for that 
reason they desired to have in the blank as many of the require- 


616 


Senate Judiciary Committee. 


ments of the Armstrong Law as they thought were desirable, par¬ 
ticularly as to the publicity requirements. 

Q. Before that meeting was held in New York, the San Fran¬ 
cisco fire had occurred ? A. Yes, sir; the San Francisco fire had 
occurred. 

Q. And I presume the complications arising because of that 
fire were discussed more or less ? A. Yes, sir. 

Q. And the policy to be pursued by the different departments 
within their respective jurisdictions was discussed? A. They all 
seemed to be desirous of knowing what the policy of New York 
State would be, as they recognized that New York State was the 
pivotal center, as New York had 72 of the insurance corporations 
out of 160, and all the other states had each but a few companies, 
and they were anxious to know how New York intended to handle 
it, and were very willing to follow the lead of New York State. 

Q. Then do I understand the policy to be pursued by the 
different states was not considered ? A. How is that ? } 

Q. I ask if I was to understand that the policy to be pursued 
by the different states was not considered at that convention ? 
A. At the meeting in New York? 

Q. Yes. A. No. At the meeting in New'York there was 
general discussion of the subject as to what was the wisest and besf 
course to be pursued. 

Q. You attended also the convention at Washington? A. I 
attended the convention at Washington. 

Q. And I suppose these blanks your committee had prepared 
were presented at that convention ? A. They were. 

Q. And were considered by that body or convention ? A. Yes, 
sir; they were. 

Q. And were-discussed more or less? A. They were discussed. 

Q. Considerably? A. There was considerable discussion on the 
Gain and Loss Exhibit, and there was an element in the conven¬ 
tion that wanted to go further than the Committee on Blanks did; 
that is, they wanted to incorporate in the convention blank all that 
New York was to have in its Part B ; they wanted to take the 
New York A and B blanks and put them under one blank; some 
of the states wanted all the information under one blank which 
New York obtains under its two separate returns. 

Q. Now at this convention what was done in relation to the 
San Francisco situation? A. At that convention there was a con¬ 
ference held regarding the San Francisco conflagration. It was 


Testimony of Mr. Appleton. 


617 


not a matter that was taken up in the convention proper, but there 
was an executive meeting. 

Q. It is a matter they would not care to discuss in an open 
meeting? A. How is that? 

Q. It is not a matter they would care to discuss in an open 
meeting ? A. It was decided £>r determined not to have it dis¬ 
cussed at an ojien meeting, for fear it might be reported in some 
way or another in an incorrect manner. And it was decided at 
that convention that it would be desirable that we should secure 
a full sworn return of the financial condition of the companies as 
of October 31st. 

Q. Yes? A. And it was agreed that each state should become 
responsible for its own companies, and that Yew York should take 
in all of the foreign companies of other countries domiciled in 
this State. And if the returns of any company or companies were 
alarming, that immediately the Department of the home State 
should make an investigation of the company. 

Q. And unless these sworn statements that were sent in should 
reveal some alarming condition in regard to a special company, 
it was decided at that time there should be no investigation? A. 
It was decided that it would be desirable to await the annual 
statement as of December 31st, because some of the San Francisco 
losses were in such a state it was questionable as to what the 
amount involved was. 

Senator Page.— That is all. 

By Mr. Mayer: 

Q. Mr. Appleton, Avliat was the date of the Washington con¬ 
vention ? A. The Washington convention, if I am not mistaken, 
was held on the 2d, 3d, and 4th of October. 

Q. What was the date of this conference in the early summer? 
A. The date of the conference in the early summer was the last 
week in June. 

Q. Yow, do you recollect whether or not at the time of that con¬ 
ference the suggestions or views of Mr. Wolf, the independent 
actuary,- had been submitted to Mr. Kelsey ? A. In connection 
with the gain and loss exhibit. 

Q. Yes. A. It was at that meeting that Mr. Wolf presented his 
form of the gain and loss exhibit. 

Q. Yow, at that time had the form of this annual statement 



618 Senate Judiciary Committee. 

required by section 103 been determined by the Superintendent ? 
A. It bad been determined by the Superintendent in every par¬ 
ticular except the gain and loss exhibit, the gain and loss exhibit 
which was then considered as the most desirable was the form of 
the State of Wisconsin for some ten years. 

Q. How, when you returned from that conference in June, did 
you bring back with you the suggestions you heard from those ex¬ 
perienced men ? A. I brought back all the different suggestions, 
there were five or six forms submitted, and among them was that 
of Mr. Wolf, and as soon as the Superintendent saw Mr. Wolf’s 
form separating and grouping the items he said, there is the form 
that is intelligent, that is the form to follow. 

Q. At that conference in June which you have just testified 
about, had those superintendents determined upon a form of gain 
and loss exhibit? A. Ho, sir. 

Q. When these gentlemen, Messrs. Stillwell, Fletcher and others 
were in Albany, as testified by Mr. Kelsey, and I think possibly 
by you — A. Yes, sir — 

Q. —had that gain and loss exhibit been formulated? A. Hot 
perfected. 

Q. State whether or not it was after your return and your report 

of the various views and suggestions, that you were directed as 
you have heretofore testified, by Mr. Kelsey to build up a gain 
and loss exhibit ? A. It was. 

Q. How, after the work was completed as you have testified, 
was it submitted to Mr. Kelsey ? A. It was. 

Q. And when you went to Washington in the fall did you take 
with you that gain and loss exhibit ? A. I took the gain and loss 
exhibit as approved by the Superintendent. 

Q. Was there anybody at all who had anything to do with the 
gain and loss exhibit as thus finally accepted, outside of the In¬ 
surance Department of the State of Hew York? A.' Oh, yes; 
we had advice and we consulted with various people, and the ex¬ 
hibit taken to Washington was the approved exhibit of Hew York, 
after advising with the best talent we could get. 

Q. And what was the gain and loss exhibit which you took to 
Washington ? A. It was the approved form of the Hew York De¬ 
partment as approved by Mr. Kelsey. 

Q. Was there any other form existent at that time similar to 
' that ? A. Ho, sir. 

Q. Was that form thus taken by you, as you have yourself tes¬ 
tified, to Washington, approved or not approved by the Washing- 


Testimony of Mr. Appleton. 


619 


ton Convention ? A. It was elaborated somewhat by the Commit¬ 
tee on Blanks in Washington. It was a form containing 110 ques¬ 
tions when we went to Washington; it was a form with 125 
questions before it was submitted to the convention at Washington, 
and it was approved in the 125 question form. 

Q. How, with respect to the 110 questions, the original 110 
questions, were they all approved by the convention at Washington ? 
A. Yes, sir; every one of them. 

Q. So that in regard to this form of 125 questions, did you or 
did you not take with you to Washington 110 questions which 
have been approved and are now adopted ? A. Yes, sir. 

Q. And is that form, including these 110 questions, the form 
now used throughout the United States? A. Yes, sir; it is the 
form now used throughout the United States. I might state that 
as a result of the conference held in Albany prior to the Washing¬ 
ton Convention, in discussing the gain and loss exhibit and the 
danger of using it by reason of the different methods adopted by 
the different companies, it was suggested, and suggested at the 
conference at which Mr. Kelsey was present, that the general 
interrogatories might counterbalance that feature of the gain and 
loss exhibit. That was entirely new matter, determined at the 
time Mr. Stillwell, Mr. Fletcher and the others were here in 
Albany. 

Q. Do you know of your own knowledge whether Mr. Kelsey 
was present during the discussion? A. He was present at all the 
conferences and took part in them and discussed the different 
features as they came up. 

Q. Is this annual statement a technical statement ? A. Slightly; 
it is a very technical statement. 

Q. It is a highly technical statement, is it not ? A. Yes, sir. 

Q. Is it or is it not a statement in which a person not skilled 
in insurance technique would have to receive information, before 
he could determine as to its meaning? A. He would on many 
features of the statement. 

Senator Page.— I had forgotten one thing, Mr. Appleton. This 
San Francisco fire occurred when? A. I think April 18. 

By Senaior Page: 

Q. And under the administration of Superintendent Hendricks 
there had been sent out some letters to the insurance companies 
requiring them to make a statement of their condition as of June 
30th? A. Uo, sir; not as of June 30th. 


620 


Senate Judiciary Committee. 


i 


Q. What was it ? A. There was a statement or a letter sent 
to each company advising them to forward to the Department their 
estimated losses in the San Francisco disaster; and those figures 
were carried out in a circular which was issued, comparing the 
returns'with the figures for December 31st; and following that 
circular was issued a second circular which gave comparative 
figures, salvages, re-insurance, etc.; that was issued under Mr. 
Kelsey. 

Q. I understand that. That second one was issued pursuant to 
an understanding had in Washington ? A. Mo, sir. The under¬ 
standing in Washington was about the October 31st circular. The 
first two circulars, Senator, were based on the figures of the com¬ 
panies as of December 31st. 

By Mr. Mayer: 

Q. Of what year? A. December 31, 1905. 

Q. And then the San Francisco losses in the first circular were 
merely the estimated returns, just their net losses estimated j then 
the second circular which was issued as of a return of the con¬ 
ditions of June 30th, showed their gross loss, their salvage, their 
reinsurance, and their net losses ? The net was carried out ? A. 
The figures in the first two circulars were made in comparison 
with those of December 31, 1905, and the circular of October 
31st was a sworn statement in itself, in that the companies gave 
their assets and their liabilities on October 31st, and gave a de¬ 
tailed schedule of reinsurance that they claimed cared for some 
of the losses; and those statements of October 31st were audited 
in the same way the annual statements are audited. 

Q. And that was the one sent out pursuant to the understanding 
at Washington? A. That was sent out pursuant to the under¬ 
standing at Washington, and was sent out incident to the sug¬ 
gestion made by myself at that conference advising the gentlemen 
present at the conference that it was the intention of the Mew 
York Department to issue such a circular, the Superintendent 
having so advised me. 

Q. And the preliminaries for such a statement were in the 
Department circulars which you had sent out before? A. Mo, 
sir. The figures of June 30th were not helpful to the October 
31st statement. Of course it made a difference having the June 
30th and October 31st statements; enabling us to see whether the 
companies were keeping good faith; but the figures were entirely 
different. 


Testimony of Mr. Appleton. 


621 


By Mr. Mayer: 

Q. To make it clear: IIow many statements were there alto¬ 
gether ? A. Three. 

Q. How the first one, as I understand you, came in response to 
the course pursued in the closing days of the administration of 
Superintendent Hendricks? A. Yes, sir. 

Q. Were those responses sworn to or unsworn ? A. My recol¬ 
lection is they were unsworn. 

Q. How then, when Mr. Kelsey came in there, was there any 
other statement? A. Yes, sir. 

Q. As to what date? A. As of June 30th. 

Q. Was that sworn or unsworn? A. It was sworn to on the 
blank furnished by the Department. 

Q. Then we come to the Washington Convention? A. Yes, 
sir. 

Q. And the third and last statement ? A. Yes, sir. 

Q. Was that sworn to or not sworn to ? A. Sworn to. 

Q. How, prior to going to Washington had you any talk with 
Mr. Kelsey in regard to what views you were to present to that 
convention ? A. I certainly did have a talk. 

Q. And concerning this subject matter as to which the Senator 
has asked some questions ? A. Absolutely. 

Q. And was the suggestion you made at the Washington Con¬ 
vention yours or the Superintendent’s? A. It was the Superin¬ 
tendent’s, made by me as his representative. 

Q. And at that time were you possessed of the views and in¬ 
structions of the Superintendent in regard to a further statement? 
A. I was. 

Mr. Maver.— That is all. 

t/ 

By Senator Smith: 

Q. I was not here when your examination first commenced, 
Mr. Appleton. How long have you been in the Insurance De¬ 
partment ? A. About twenty-four years. 

Q. During the past ten years you were acquainted during all 
that time with the relations of the different members of the De¬ 
partment to the entire work ? A. Yes, sir. 

Q. During .the past ten year's what officer of the Department 
has been charged with the authority to determine as to the neces¬ 
sity and propriety of examinations into the financial conditions 


622 


Senate Judiciary Committee. 


and business methods of the insurance corporations ? A. The 
Superintendent. 

Q. JSTo subordinate of the Department had been invested with 
such authority? A. No subordinate in the Department was 
vested with that authority. 

Q. None to determine as to the necessity or propriety of the 
examination? A. Frequently we would have a suggestion made 
from the New York office, advising that a certain examination 
should be made, but examinations were made at the direction of 
the Superintendent. 

Q. Directions to whom ? A. The direction issued, Senator, to 
the first deputy, to Mr. Hunter. I think they were always sent 
to him. 

Q. And upon whom devolved the duty of determining the 
entire question and the scope of such an examination ? A. The 
Superintendent. 

Q. Was that duty ever placed upon any other officer of the 
Department during the past ten years ? A. Never to my knowl¬ 
edge. 

Q. Or assumed by them ? A. Never to my knowledge. 

Q. The examination was conducted by whom? A. Well, what 
do you mean? 

Q. The examination into the financial condition of the insur¬ 
ance corporations ? A. An examination into the financial con¬ 
dition of an insurance corporation was usually conducted in all 
instances by the chief examiner of the Department, I think. 

Q. But under the direction of the Superintendent? A. Under 
the direction of the Superintendent. 

Q. And he made his report, the chief examiner made his re¬ 
port, to whom? A. The chief examiner made his report to the 
Superintendent. 

Q. What connection with such an examination did the first 
deputy have, if any? A. Well, in some examinations, a part of 
the work, as for instance if a company had large mortgage hold¬ 
ings, or large real estate holdings the first deputy would look 
after that detail of the work. 

Q. What do you mean by looking after that detail of the work ? 
A. Well, take a company like the Mutual Life; they may have 
3,000 or 4,000 loans to be appraised, in an examination and the 
sufficiency of the titles has to be passed upon by counsel, and ap¬ 
praisers have to appraise, and the keeping of the record and the 


Testimony of Mr. Paterson. 


G23 


preparation of the exhibits to go into the report would he looked 
after by Mr. Hunter. 

Q. That is after the details of the investigation were reported 
by the examiner ? A. The examiner would furnish a schedule of 
the mortgage holdings, and then the appraisers would he desig¬ 
nated by the Superintendent, and the counsel would he designated, 
and they would make their returns, and Mr. Hunter would tabu¬ 
late such returns. 

Q. And his work was in respect to information conveyed to 
him by the examining forces? A. In those cases; yes, sir. 

Q. Was any part of the technical work of the examination into 
the internal affairs of insurance corporations entrusted to the 
first deputy? A. To the best of my knowledge the examina¬ 
tions in that particular were conducted by the chief examiner, 
except that I have in mind the instance of the examination — the 
last examination I think it was — of the Equitable; and in that 
instance the examination was made by both Mr. Hunter and Mr. 
Vanderpoel, if I am not mistaken. 

Q. And that was after the exposure ? A. That was after the 
investigation of the Equitable by Superintendent Hendricks. 

By Senator Page: 

Q. Did the first deputy have any duties to perform ? A. Yes, 
sir. 

Q. What were they? A. Well, he was the general executive 
head at the Hew York office; in cases of increase or decrease of 
capital he would act as commissioner, and he was the general 
executive man at Hew York, and where there was assigning the 
examining force to he sent into the different companies, Mr. 
Hunter would make all the details and have general supervisory 
control in that wav. He was the office man at Hew York. 

t/ 

John S. Paterson, being duly sworn, testifies as follows: 

By Mr. Mayer: 

Q. Your full name, please? A. John S. Paterson. 

Q. How I am going to ask you to talk a little louder than is 
your usual custom. What is your position in the Insurance De¬ 
partment of this State? A. Actuary. 

Q. Are you the head of the actuarial department of the Insur¬ 
ance Department ? A. I am. 


624 


Senate Judiciary Committee. 


Q. How long have you been connected with the Insurance De¬ 
partment? A. Forty years, nearly. 

Q. Your father I believe preceded you? A. Yes, sir. 

Q. In connection with the amended Insurance Law, known 
popularly as the Armstrong Law, what new subjects came under 
your consideration ? A. The principal ones were relating to the 
limitation of expenses and of standard policy forms. 

Q. Mr. Appleton has just described the course of routine and 
assignment of matters and communications. After communica¬ 
tions reached you what course was pursued with reference to the 
matters arising regarding the standard forms of policies, first ? 
Take that up first. A. The standard forms of policies had to be 
decided upon before any answers could be given in regard to 
them. 

Q. Were there many questions which arose in regard thereto? 
A. Quite a number, yes sir.. 

Q. Were there views and suggestions that came from various 
sources? A. Yes, sir. 

Q. From where, for instance? A. The majority came from a 
committee of actuaries of the Actuarial Society of America, prin¬ 
cipally. 

Q. What is that society composed of ? A. The actuaries of the 
companies of this country and of Canada. 

Q. Do you recall the printed form of the standard form of 
policy upon which there is considerable writing? A. Yes, sir. 

Q. What is that? A. The form. 

Q. Do you remember in whose handwriting much of those 
writings are? A. Yes, sir. 

Q. Whose are they? A. Mine. 

Q. How, will you describe to the Committee how those writ¬ 
ings came to be placed upon that paper, or policy, by you ? I am 
now referring to an exhibit in evidence, the number of which I 
do not recall. A. Those standard policy forms when received, I 
think, went direct to the Superintendent with the brief from the 
Committee of Actuaries ; also one or two letters of suggestion came 
in particular. He went over them and we had one. or two con¬ 
sultations in regard to them. He turned them over to me with 
directions to modify them as little as might be possible, to hold as 
strictly as could be to the forms printed in the law and to adopt 
such suggestions as I thought from my experience were advisable. 
They were penciled upon a set of policies, and T handed them in to 
the Superintendent. 


Tes'j riMONY of Mr. Paterson. 


625 


Q. Did you discuss these forms as those penciled by you, with 
the Superintendent? A. After he had given them study. 

Q. Did you discuss them? A. Yes, sir. 

Q. AY ere some of the suggestions made by you accepted ? A. 
Some. 

Q. Were some of them rejected? A. Some. 

Q. State whether or not the Superintendent himself made any 
suggestion? A. He did. 

Q. Did you explain to the Superintendent and discuss with him 
the technical features? A. Yes, sir. 

Q. Did you give him the benefit of your long experience in 
these matters ? A. I tried to. 

Q. Are you able to sav whether or not the standard form as 
finally promulgated was the result of the determination of the 
Superintendent after these various discussions to which you have 
referred ? A. Discussion with others as well as mvself. 

Q. With you and with others? A. Yes, sir: 

Q. Are you able to say whether the standard form in the shape 
in which it was finally promulgated on October 1st was his deter¬ 
mination or not'? A. I so considered it. 

Q. What do you mean by “ so considered it ” ? An I considered 
it his work, that what I did was done by his direction, under hr 
suggestion. 

Q. Did the forms, or did they not, embody in addition to your 
own suggestions certain forms of his? A. They did, yes, sir. 

Q. Are you quite sure that he rejected some of your sugges¬ 
tions? A. Yes, sir. 

Q. Were you in Albany when various insurance experts were 
present discussing the standard forms? A. Yes, sir. 

Q. When was that as near as you can remember. I don’t 
care for the day. AY as that in Tune? A. I\o. 

Q. AYhen was that ? A. It was along in the latter part of Sep¬ 
tember. 

Q. AYhen those experts were there? A. Yes, in relation to the 
first four standard forms. 

Q. When did you undertake first the work connected with these 
forms? A. In the early part of August I believe. 

Q. I have spoken of certain exhibits the numbers of which I do 
not remember. I now refer to Exhibits 4, 5, fi, and I of March 
22, 1907, and I ask you whether these are the papers to which 
vou have referred in answer to my questions? A. Yes, sn, thos* 1 
are the four standard forms, statutory forms. 


62G 


Senate Judiciary Committee. 

Q. Are those the particular papers which contain writings m 
your handwriting? A. Yes, sir. , 

Q. Were there discussions or interviews or conferences between 
the Superintendent and yourself in regard to the questions arising 
under the section of the law relating to the limitation of expenses? 
A. Numerous discussions. 

Q. How long a period would you say they covered ? A. I think 
they began in the latter part of the summer, last year. I don’t 

recollect just exactly. 

Q, Are you able to state whether or not any original ruling 
relating to your Department — original ruling — was the result 
of the Superintendent’s determination ? A. I presume I could 
answer that better if you would let me make a little explanation. 

Q. Certainly. A. Shortly after the law was published we tried 
to anticipate questions which we thought might arise and there 
was a little memorandum formulated in relation to certain things 
relating to the law, and that was given particular attention by 
the Superintendent, and he gave me his suggestions in regard to 
the matter, and they controlled me. 

Q. Exactly. Now r , from time to time did questions arise? A. 
Yes, sir. 

Q. And were rulings asked for by companies throughout the 
State and country ? A. Yes. 

Q. Was the subject-matter thus referred to discussed by you 
with the Superintendent? A. Always, unless it had come up in 
some prior question. 

Q. Now, was there any original ruling ever determined by you 
without consultation with the Superintendent ? A. No, sir. 

Q. Are you able to state whether or not every ruling was the 
result of conference with the Superintendent — that is, from his 
original ruling? A. I think so, yes, sir. 

Q. Are you quite sure about it? A. Yes, sir. 

Q. That is to say, every ruling relating to a new subject- 
matter? A. To a new subject, yes, sir. 

Q. Now, Mr. Appleton has described this evening the routine 
of the office in regard to initialing letters. Are you familiar with 
the routine, too? A. Yes, sir. 

Q. What is the course in that respect? A. I don’t know that 
I can explain it any better than Mr. Appleton has. 

Q. You heard his testimony ? A. Yes, sir. 

Q. Was that correct? A. To the best of my knowledge and 

belief. 


i-- ! _ .. .1_L 




“ —~ ._ m 




f 


G27 


Testimony of Me. Paterson. 


Q. How, referring to a package which, was introduced in evi¬ 
dence as Exhibit 40, on March 22, 1007, and relating to section 
101, containing a number of rulings, are you familiar with the 
package ? Just examine some of those letters, especially examin¬ 
ing at random any letter on which your initials appear. A. Yes, 
sir. 


Q. Aow, wherever your initials appear and the ruling is not 
a duplicate ruling, was that ruling made by you alone, or was it 
made by the Superintendent after consultation with you? A. 
After consultation. 

Q. Is that correct or incorrect? A. Correct. 

Q. Made by the Superintendent? A. Yes. 

Q. State whether or not the Superintendent gave you directions 
as to what form the letter should taike? A. In certain cases. 

Q. And in other cases state whether he approved the form that 
you had prepared? A. He did. 

Q. In such cases as you physically wrote the letter, whose 
initials appear on the letter? A. Mine. 

Q. Are there any of the rulings relating to section 101 that 
were not the subject-matter of consultation, conference, interview 
or conversation with the Superintendent? A. I believe not. 

Q. Do you recall any? A. Ho. 

Q. What is your answer? A. Ho. 


By Senator Page: 

Q. You spoke of this little memorandum that was prepared in 
advance. Who prepared that in anticipation of questions that 
might arise? A. That came from suggestions of several parties. 

Q. Yes, I know; but I say, who prepared that little memo¬ 
randum? You did, didn’t vou? A. I did. 

7 o 

Q. Yes. A. I put it in form, part; formulated certain parts. 

Q. How, when a question would arise which required a ruling 
which an actuary would actually pass upon, did you go to Mr. 
Kelsey and ask him how you should reply, or did you prepare a 
reply and submit it to Mr. Kelsey? A. Matters of that kind — 
technical, I prepared the reply in the first place. 

Q. I understand that wherever in this exhibit 40, which relates 
to section 101, your initials appear upon the letters, that those 
were drafted by you ? A. Formulated. 

Q. Formulated by you and submitted? A. Submitted. 

Q. To the Superintendent ? A. Either before or after consulta¬ 

tion. 


.0 



628 


Senate Judiciary Committee. 


i 


1 


Q. Are those the ones that 1 went over before? A. \es. 

Senator Page. — As I remember that lot there were eighty-one 
letters. 

Mr. Mayer.— Fifty-one in this particular bundle. 

Senator Page.— Then that was not the bundle. 

Mr. Mayer.— There was another bundle with eightv-one. 

Mr. Ainsworth.— There were two of those bundles, one relating 
to- 

Senator Page.— Ninety something, wasn’t it? 

The Witness. 1 —AMs, sir. 

Mr. Ainsworth.— Limitation of expenses. 

Mr. Mayer.— Limitation of expenses. 

Mr. Ainsworth.— I thought this was the one, but they are 
identical. 

Senator Page.— I think his explanation is clear. 

By Mr. Mayer: 

Q. In order to make it entirely clear, is your testimony the 
same with regard to section 97, relating to limitation of expenses? 
A. Yes, sir, with the single exception of those, cases where it is 
simply a determination of percentage, or something of that kind. 

Q. Now, of course, in order to have that clear and have no 
misapprehension, did you yourself pass upon the purely actuarial 
questions, involving mathematics and figures ? A. AMs. 

Q. Some questions, for instance, regarding figuring upon valua¬ 
tion of policies? A. Yes. There is nothing there relating to 
the valuation of policies especially. There is some figuring in 
connection with commutation of renewal commissions. 

Q. To make a broad question, in regard to matters involving 
the actuarial science and mathematics, those questions, I assume, 
you passed upon ? A. Yes, sir. 

Q. Ts that correct? A. Yes, sir. 

Q. But in regard to questions involving an interpretation of 
the statute or a line of administrative policy requiring develop¬ 
ment under the new law, were those the questions which you 
discussed with Mr. Kelsey? A. Yes, sir. 

By Senator Page: 

Q. I understand that wherever the letters have your initials 
on, they were drafted, in the first instance, by you; is that right ? 
A. Yes, sir. 




Testimony of Mr. Paterson. 


629 


Mr. Hatch. I think there were ten in the bundle which you 
looked at which were drafted by Mr. Kelsey and the remainder 
by Mr. Paterson, as I recollect it. 

Senator Page.— Yes. 

Mr. Mayer.—And some of them the witness has said he drafted 
after-consultation with Mr. Kelsey. 

By Mr. Mayer: 

Q. While the Senator is looking through the bundle let me ask 
this question. Every letter that was finally physically dictated by 
you had your initials? A. Yes, sir. 

Q. Were these letters having to do with rulings signed by you 
or by Mr. Kelsey ? A. By Mr. Kelsey. 

Q. All of them ? A. All of them. 

Q. So that even if you had consulted and had received his sug¬ 
gestions of approval or disapproval, as the case might he, and 
then had put the matter into final shape, did you then take the 
matter, letter, communication or whatever it was in such final 
shape, hack to Mr. Kelsey ? A. I think I took every one back 
personally. There may have been perhaps one or two that I might 
have handed to Mr. Appleton, going through. Mr. Kelsey signed 
them all personally. 

Q. And you did not sign ? A. No. 

Q. Did you sign any letter that had anything to do with the 
ruling under this new law? A. Ho, no official letter that I 
know of. 

By Senator Page: 

Q. In examining this file I find your initials upon every letter 
except one, and to that one the original is not attached, and so 
there are no initials upon it. Is that so ?• A. I presume that is 
so, Senator, if you have gone through them. I think I initialed 
them all. 

Q. How, of course, no one signed letters in the Department but 
Mr. Kelsey himself, did there? A. Ho, sir; officially. 

Q. Ho one else signed letters? A. All of those letters were 
signed personally by Mr. Kelsey. 

Q. How, concerning the standard forms, exhibits 4, 5, 6, and 7, 
is this the first draft, or were there other drafts (papers handed 
witness) ? A. Oh, I should say that was the second, perhaps the 
third. The first draft, the rough draft, was in lead pencil entirely. 

Q. I call your attention to exhibit 4 and I ask you concerning 


630 


Senate Judiciary Committee. 


the lead-pencil memorandum on that, whether that constituted the 
first draft? A. No, sir. 

Q. Those were additional ? A. Yes* sir. 

Q. Now, will you take that and point out the changes that were 
made by Mr. Kelsey? A. Well, I couldn’t do it, sir, unless I 
should point out all the changes, because they were all submitted 
to him and passed upon by him. 

Q. They are all in your handwriting ? A. Yes, sir, the clerical 
work was done by me. 

Q. And were drawn out prior to their submission to Mr. Kelsey, 
were they not? A. Not this, no — not entirely. This is not the 
first draft, which was a lead pencil draft, and some or many 
changes which I had made in there Avere not approved by Mr. 
Kelsey. The red ink corrections here show, I think, it was the 
second draft. 

Q. Then you cannot say to what extent that work represents 
Mr. Kelsey’s and to what extent it represents yours ? A. There is 
no suggestion in here of mine that I knoAV of. 

Q. Then are we to understand that all are Mr. Kelsey’s ? A. 
That is what I mean, yes, sir, that is, this Avas made up — it was 
made up under his direction. 

Q. I understand that — made up under his direction. He told 
you to prepare that; is that it? A. Yes, sir. 

Q. And you in that way considered that Avhen you Avere formu¬ 
lating it you A\ 7 ere acting merely as the employee of Mr. Kelsey ? 
A. I took the suggestions that he made to the Department and in¬ 
corporated such of those as I thought Avere right and proper. 
There Avere some feAV changes AAdiich I made myself of my own 
initiative. Some feA\ T of those he adopted — approved; others he 
did not. 

Q. Now, as I understand it from your testimony, the formu¬ 
lation of these changes in the blank Avere made from various sug¬ 
gestions Avhich came to the Department from various sources ? 
A. Yes, sir. 

Q. Mostly from the actuaries or other officials of insurance 
companies? A. Other gentlemen. 

Q. But, I say, mostly ? A. Mostly, yes, sir. 

Q. Then you took these suggestions, various suggestions, and 
you formulated them in the shape of amendments to this form? 
A. Yes, sir. 

Q. And Avrote them in ? A. Yes, sir. 

Q. And then you submitted those to Mr. Kelsey ? A. Yes, sir. 




Testimony of Me. Behan. 


631 


By Mr. Mayer: 

Q. Just a final question. As far as your recollection serves you, 
liow many drafts were there made of the standard form of policy ? 
A. There were two, and perhaps three. 

Mr. Mayer.— That is all. 

Thomas F. Behan, being duly sworn, testified as follows: 

By Mr. Mayer: 

Q. Your full name ? A. Thomas F. Behan. 

Q. How long have you been in the Department ? A. Almost 
twenty-four years. 

Q. You went in in what capacity? A. As messenger. 

Q. You have worked up to your present position? A. Yes, 

sir. 

Q. By gradual promotions ? A. Yes, sir. 

Q. What is your present position ? A. Chief Clerk and Acting 
Third Deputy. 

Q. What have you especial charge of? A. Of assessment and 
fraternal orders. 

Q. Are you a member of the bar ? A. Yes, sir. 

Q. In addition to that, have you the duties of Chief Clerk ? A. 
Chief Clerk, overlooking the general office work. 

Q. So that if I get it correctly, you are the Chief Clerk with 
general supervision of the office work ? A. The general office. 

Q. And you have especial charge of the fraternal and business 
assessment associations ? A. Yes, sir. 

Q. How, for purposes of brevity, I will ask you whether you 
have heard Mr. Appleton’s testimony this evening as to the routine 
of the distribution of mail and the like? A. I have. 

Q. Is that correct as you understand it ? A. It is correct. 

Q. What was the course pursued by you in regard to com¬ 
munications received by the Department, or communications sent 
out by the Department in relation to the fraternal and business 
assessment associations ? A. Always after consultation with Super¬ 
intendent Kelsey. 

Q. Since he has been Superintendent can you state how many 
respective kinds of associations referred to he has given especial 
attention to ? A. About thirty-four. 

Q. And divided how? A. About twenty-eight are business 


632 


Senate Judiciary Committee. 


assessment associations, three are live stock and the balance 
fraternal orders. 

Q. State whether or not you have discussed with Mr. Kelsey 
the character of literature sent out by these associations ? A. I 
have. 

Q. What did he have to say about that ? A. He has directed me 
in almost every instance as to just what should be done in relation 
to communicating with the companies, in relation to these various 
leaflets — advertising leaflets and so forth. 

Q. What has been done in regard to the correspondence that 
issued upon the Department? A. I would bring to the notice 
of Mr. Kelsey the different forms of contract, advertising leaflets 
and by-laws which I obtained under his direction. He formu¬ 
lated a plan to have all these companies file these different docu¬ 
ments in the Department. We would take, for instance, four at 
a time and close up four companies before taking up any others, 
because it entailed considerable correspondence, and I would bring 
these matters in and ask Mr. Kelsey what he desired to do about 
them, consult with him, relative to the different features, and he 
would direct me what to do. 

Q. You say that your plan was to close up four at a time ? 
A. I mean that we would dispose of four corporations at a time, 
so that we would not have more than that number running. 

Q. Did that involve the direction of the literature and the con¬ 
tracts? A. Yes, sir. 

By Mr. Ainsworth: 

Q. And the by-laws? A. And the by-laws also. 

By Mr. Mayer: 

Q. And the by-laws ? A. Yes, sir. 

Q. And the advertisements, which I assume are included in the 
literature? A. Yes, sir, anything which he considered mislead¬ 
ing to the public. 

Q. After your consultation with him did you draft the corre¬ 
spondence? A. Yes, sir. 

Q. Sometimes before you consulted did you draft the corre¬ 
spondence? A. In very rare instances. Mostly always consulted 
him before I drafted the letter. 

Q. This subject matter, was it one that involved a Depart¬ 
mental policy? A. Yes, sir. 


! 


Testimony of Mr. Behan. 


633 


Q. After you had thus drafted the letters, as you testified, sub¬ 
sequent to conference or consultation with the Superintendent, 
what was done with those letters ? A. Taken to Mr. Kelsey. 

Q. Did you yourself sign any of these letters? A. I did not. 

Q. Who signed them ? A. Mr. Kelsey. 

Q. How, after you had drafted letters, as you testified, and 
submitted them to Mr. Kelsey, do you recall any instance — I do 
not mean particular instances, but the fact of instances occurring 
where changes were made by Mr. Kelsey ? A. I do. 

Q. Mere they seldom or frequent? A. Frequently we might 
differ in relation to an interpretation of a case that I would look 
up for him. 

Q. A law case? A. A law case; yes, sir. 

Q. Were the law books occasionally consulted? A. Yes, sir. 

Q. And decisions of the court examined? A. Yes. 

Q. How, these packages are in evidence, would you say that 
the correspondence in regard to these various companies that you 
have referred to was slight or was very much ? A. Quite volumin¬ 
ous. I should say there were in the neighborhood of 180 letters 
written since the plan of work has been taken up. 

Q. Will you tell the Committee whether the examination into 
the literature and contracts and by-laws of these companies in¬ 
volved a great deal of detail? A. A great deal of detail. For 
instance, some of the by-laws consisted of over a hundred printed 
pages and it would take considerable time to wade through them. 

Q. Did you call to Mr. Kelsey’s attention such portions thereof 
as you thought ought to be called to his attention? A. Yes, sir. 

Q. Was the suggestion of this method of supervision and call¬ 
ing to account these companies yours or the Superintendent’s ? 
A. The Superintendent’s. 

Q. How early in his tenure of office was this suggestion or 
direction made to you ? A. The first case I remember was a 
newly organized fraternal order; it came to his notice on the 24th 
of May. That was the first case that we had. 

Q. That was about a week after he took office? A. Yes, sir. 
Then subsequent to that time he directed that all of these com¬ 
panies should be communicated with, taken up alphabetically. 

Q. Is that course being continued ? A. It is. 

Q. You are now along in the alphabet, I assume? A. Yes, sir. 

Q. How, do letters bear your initials in accordance with the 
Department custom ? A. Yes, sir. 


634 


Senate Judiciary Committee. 


Q. Are you able-to say whether any of those letters relating to 
this subject matter were signed by any one but Mr. Kelsey? A. 
They were all signed by Mr. Kelsey. 

By Senator Page: 

Q. Do I understand that this matter of revising the litera¬ 
ture and by-laws and so forth of these assessment companies was 
first taken up under Mr. Kelsey, and not before by any Superin¬ 
tendent? A. This is the first strictly formulated plan that was 
ever taken up by the Department to my knowledge. 

Q. Didn’t you, under Superintendent Hendricks, write letters 
to these various companies, or different ones, calling attention to 
statements in their advertisements and literature ? A. Only when 
some policy-holder would write to the Department and forward 
a copy of a leaflet; then that company would be regulated. 

Q. How long have you had charge of that Department? A. 
Since last fall. 

Q. Do you mean this last fall ? A. Yes, sir. 

Q. How long have you been in the Department ? A. Twenty- 
four years. 

Q. I mean in that particular branch ? A. That branch was in¬ 
stituted by Mr. Kelsey. 

Q. What were you doing under Superintendent Hendricks? 
A. General office routine work and correspondence. I had charge 
of all the certificates that were issued, there, and of incorporation 
of companies. 

Q. Who had charge of the. assessment companies? A. Why 
principally Mr. Appleton looked after the assessment companies. 

Q. Then I suppose that in your testimony you are merely re¬ 
ferring to those things that you did ? You do not know what Mr. 
Appleton did in the past ? A. I knew the general policy of the 
Department, and, as I say, those cases that were brought to the 
notice of the Superintendent by a policy-holder asking if such 
and such were true, were taken up by the Department with'the 
association, and the association was made to correct whatever was 
wrong. 

Q. These assessment companies have been in business ever since 
1887, have they not? A. Since 1883, generally. 

Q. That is when they began to be organized ? A. Yes, sir. 

Q. A large number of them failed and otherwise about 1887; 
is that right? A. Quite a large number. Well, I couldn’t say 
any particular year. 


Testimony of Me. Mayee. 


635 


Senator Page.— The year 1887 comes to my mind for some 
reason or other in regard to those companies. 

Mr. Ainsworth.— There was an amendment of the law in that 
year. 

The Witness.— There was an amendment, I believe, in 1887. 

Q. The first effort of strict supervision, am I to understand, 
was under Superintendent Kelsey; is that your statement? A. 
Yes, sir; that is true. 

By Senator Smith: 

Q. I do not know as I just understand this situation. I under¬ 
stand you to say that Mr. Kelsey inaugurated the plan of super¬ 
vision and regulation of the literature, advertisements and by-laws 
of these assessment companies upon the motion of the Department, 
that prior to that time those matters were gone into when com¬ 
plaint was made ? A. That is the idea, that is true. 

Q. But that the first organized plan to look into and organize 
those things upon the motion of the Department, in the first in¬ 
stance, was inaugurated by Mr. Kelsey ? A. That is true. 

By Mr. Mayer: 

Q. Just one question, to make it clear. I understood you to say 
that you were placed in charge of that department last fall ? A. 
Yes sir, formally in charge; but prior to that I had run over 
several of these companies, but owing to the voluminous corre¬ 
spondence and great amount of work that took place, or rather was 
brought about rather late in the Department last year. Mr. 
Kelsey did not take up the regular institution of the work until 
last autumn, but during the summer there were several cases. The 
first case was May 24th; it ran on in a desultory sort of way until 
Mr. Kelsey formulated this plan in the autumn. 

Q. And then that was made, as I understand you, and com¬ 
pleted on your part ? A. Yes, sir. 

Q. And this plan of continuous attention in alphabetical order 
in groups of four was placed in your charge for administrative 
purposes ? A. Yes, sir. 

Q. And that was the first plan of any kind, as distinguished 
from action upon complaint, in the Insurance Department 
adopted by the Insurance Department since you have been con¬ 
nected with it? A. Yes, sir. 

Julius M. Mayee, called as a witness, being duly sworn, testi¬ 
fied as follows; 



636 


Senate Judiciary Committee. 


By Mr. Hatch: 

Q. Will you give your name? A. Julius M. Mayer. 

Q. And your residence? A. 375 West 123d street, New York 
city. 

Q. Were you formerly Attorney-General ? A. Yes, sir. 

Q. When did your term begin? A. January 1, 1905. 

Q. When did it end? A. January 1, 1907. 

Q. Do you recollect, Mr. Mayer, when, your attention was first 
directed to the insurance condition in respect to the form of in¬ 
surance? A. Yes. 

Q. When was that ? A. In the closing days of Mr. Hendricks’ 
administration, and to the best of my recollection prior to "the 
appointment of Mr. Kelsey. 

Q. And about what month was it, as near as you can state? 
A. I should say the latter part of April, 1906. 

Q. Will you state the circumstances that called it to your atten¬ 
tion ? A. I received a telephone from Superintendent Hendricks, 
that a Mr. Vail, the president of the Dutchess Fire Insurance 
Company, would see me in the course of a few minutes. I was 
then at the office of the Attorney-General. Mr. Vail did call. 

Q. State your conversation with him. A. There was with liim 
at the time one, or possibly two men. Mr. Yail said that he was 
very deeply concerned about the condition of the Dutchess. Fire 
Insurance Company of which he was president. That so far as 
he could gather they had suffered Very severe losses. 

Q. Suffered severe losses in connection with what fire ? A. In 
connection with the San Francisco fire. He was deeply distressed 
and said that practically his whole fortune and that of his son 
were in this company and he was afraid that they would have to 
go into the hands of a receiver, and he asked whether if such an 
event occurred it was possible for a responsible officer of the com¬ 
pany to be appointed receiver, because, he urged, the officers of 
such a company were more familiar with its affairs and could 
administer its affairs more economically. He said “ I want to 
know, because I want to know whether that is the kind of policy 
that would be adopted, or whether there would be a political re¬ 
ceiver.” I said to him a Mr. Yail, so far as any recommendation 
of the Attorney-General will be received by the courts, and so far 
as I can view the situation I should certainly recommend the ap¬ 
pointment of a responsible officer of a company affected by the 
San Francisco fire.” I said “ The policy of this office since I have 


Testimony of Mr. Mayer. 63 ? 

t 

been Attorney-General has consistently been to oppose the appoint¬ 
ment as receivers of persons who have been officers of a failing 
concern, but this situation is entirely different, and where the sole 
cause of insolvency turns out to be the San Francisco fire and 
there is no other reason to the contrary I shall recommend the 
appointment of a reputable and responsible officer. Now,” I said, 
“ Mr. Vail, how do you know you are insolvent? ” I said “ You 
do not want to be in a hurry about this. What proof have you ? ” 
“ Well,” he said, “ I don't know. We haven’t any information 
practically excepting what we see in the newspapers, but we have 
large insurances out there, large risks, and I am afraid that we 
may be insolvent.” I said “ Now, I am not in any very great 
hurry to accede to any plan which puts insurance companies into 
the hands of receivers in this contingency.' 7 I said “ You had 
better go back to Poughkeepsie and find out a little more about 
your situation, and when the Insurance Department informs me 
that you are insolvent it will be time enough to talk about a 
receiver.” That was, in substance, the conversation. 

Q. Did you subsequently to that conversation, and by reason 
of it, have a consultation with Governor Higgins ? A. I did, the 
very same day. 

Q. State your conversation with Governor Higgins. A. My 
recollection is that the conversation I have just referred to was in 
the morning. After luncheon, I think — at any rate, during the 
afternoon I went in to see Governor Higgins. I told him, in 
substance, the conversation that I have just related. I said to him, 
“ Governor, it seems to me that this question is one that concerns 
not merely my office so far as the policy of receivers is concerned, 
but I think that it is a very grave and serious question which 
concerns the administration, and I should like to have your views 
and have your judgment, because in this matter I feel that we 
must all act with a settled or unified plan.” 

Q. What reply did he make, if any ? A. In other words, I said 
“ Governor, this situation in San Francisco is one that looks to me 
to be very serious.” To that the Governor said “ Yes, it is a sit¬ 
uation of great uncertainty, and may be very serious. I think 
that your idea in regard to the recommendation of appointment 
of the officers of these companies, if any of them go into the hands 
of receivers, as such receivers, is a very wise and prudent one, 
but,” he said, “ we must endeavor to prevent any going into re¬ 
ceiverships.” He said “ I am very deeply concerned, and we must 


638 


Senate Judiciary Committee. 


have very cautious and careful and conservative action. If one 
of these companies goes at this time there is no telling but there 
might be a complete break along the line, and business has been 
so seriously affected by a good deal of agitation all this winter 
and this spring, and now comes this San Francisco situation, that 
we must be very careful, and I want you to do everything in your 
power so far as the law will permit you to prevent any catastro¬ 
phe/’ or words to that effect. He said “ We must have conserv¬ 
ative action.” 

Q. At that time Mr. Kelsey had not been appointed, had he ? 
A. My recollection is that he had not been appointed. 

Q. Do you recollect the occasion of his appointment, the time 
when he was appointed ? A. Well, I remember as best I can that 
I was in Hew York; I am quite certain that I was not in Albany; 
and my recollection is that his appointment was on May 2d, and 
that he assumed office on May 17th. 

Q. Do you know whether you had been absent from Albany for 
some period about that time? A. I do. I was absent a day or 
two or three before May 2d, and for some days after May 2d; I 
cannot fix the dates. 

Q. What is your next recollection concerning the subject of in¬ 
surance that you consulted with anybody? A. Shortly after my 
return to Albany, which was some time toward the end of May — 
at any rate, it was after the 17th — Mr. Kelsey and I had quite 
a general talk. 

Q. Where was that ? A. That talk, I think, was in the Attor¬ 
ney-General’s office, that first time. 

Q. How, will you state it to the Committee as near as you 
are able to recall it? A. The main subject was the insurance 
situation, the fire insurance situation, I cannot pretend to remem¬ 
ber the words. The substance of it was that Mr. Kelsey said 
that the situation was a very serious one and I said I thought it 
was, too. He said that he thought it was a situation that had to 
be very carefully watched and that he was studying it and seeing 
what course ought to be pursued and thought that he ought to 
keep in close touch with the Hew York office and have the Hew 
York office keep in close touch with the situation. We talked 
about some of the general features of the new law, and he said, 
or I said, that we would take the whole subject matter up at our 
first opportunity. 

Q. Where were you living at that time ? A. Beginning with 



Testimony of Me. Mayee. 


639 


about June first of that year i returned to live with Mr. Kelsey 
and others, they having moved from Elk street to Columbia street 
— 97 Columbia street, which has been referred to — and from 
the first or second of J une or thereabouts until the end of my term 
I lived at 97 Columbia street. 

Q. How frequently did you meet the Superintendent there? 
A. Every day when I was in Albany. 

Q. Did you have any conversation with him at that time, either 
at the house or elsewhere, with respect to the fire insurance situ¬ 
ation? A. The first situation, in conjunction, I may say, with 
other insurance problems, was the occasion of very frequent con¬ 
versation. I may say, if I am permitted, that when I was in 
Albany I believe there was not a day when 1 didn’t have some 
talk with Mr. Kelsey about some matters relating to his Depart¬ 
ment — sometimes at 97 Columbia street, quite frequently at the 
Attorney-General’s office, and on occasions when some peculiarly 
difficult question arose which required extended discussion, by 
which I mean perhaps three-quarters of an hour or an hour, Mr. 
Kelsey and I would arrange to dine together, quite often at the 
Eort Orange Club. At that time of the year, I may say, that 
dinner — it being the summer time — was not served at the 
Columbia street residence; breakfast was. 

Q. Did you upon those occasions dine with him by special 
appointment and for the purpose of discussing the insurance con¬ 
dition ? A. Always. 

Q. Do you know whether or not the Superintendent and Gover¬ 
nor Higgins, either at 97 Columbia street or elsewhere, had con¬ 
sultations upon the insurance situation ? A. I was never present 
at a formal discussion. Informal questions were talked about at 
the breakfast table it being the custom, as Mr. Kelsey has said, 
of Governor Higgins to breakfast at 97 Columbia street when 
Mrs. Higgins and the family had returned to Olean; but the 
Governor and Mr. Kelsey were more accurate in arriving at their 
offices at nine o’clock in the morning than I was, and I know that 
on many occasions the Governor and Mr. Kelsey left 97 Columbia 
street together, walked up to the Capitol, while some of the rest 
of us would follow at later times, and that they were very fre¬ 
quently together during the time the Governor was in Albany 
from June until he resumed his constant living and his meals 
at the Executive Mansion, in the latter part of the year. 


640 


Senate Judiciary Committee. 


Q. Do you recall whether or not Mr. Kelsey during this peiiod 
of time consulted you from time to time as questions arose, at the 
Attorney-General’s office with respect to formal matters affecting 
either life or fire insurance? A. 4he consultations theie were 
very frequent. Mr. Kelsey would telephone up, ask me if I would 
be at leisure and would come to the Attorney-General s office, 
frequently carrying with him correspondence. When matters in¬ 
volving a special or formal opinion were under consideration those 
conversations would be preceded or succeeded by a formal letter 
asking for an opinion, but our usual method was to informally 
discuss the problems, and in such instances as it was desired 
those discussions were followed by a formal request for an opinion, 
but there were many, many conversations coming up in which 
there w 7 as no formal correspondence between the departments. 

Q. Were these conversations with respect to the general policy, 
or the interpretation of statutory laws ? A. The main conversa¬ 
tions were wdth respect to interpretation, and then, of course, ques¬ 
tions of policy were discussed. Mr. Kelsey had a habit of most • 
frequently telling me what his views were and asking in some 
instances my judgment, but, in most instances, whether those views 
were in accord with my views of the law. 

Q. Did he suggest to you or seek your advice or talk with you 
with respect to administrative matters which did not involve 
technical legal questions? A. Hot often, but he did sometimes. 

Q. Have you any recollection of any particular subject ? A. 
Well, I should say that we discussed during the time of his in¬ 
cumbency almost every question arising under the Insurance Law, 
the amended law known as the Armstrong Law and the Fire In¬ 
surance Law, excepting purely technical Insurance Department 
questions. Of course, I was never consulted, nor was there any 
interview with me in regard to strictly actuarial questions, matters 
involving these standard forms of policies, or the annual state¬ 
ments that have been referred to; but I think he and I discussed 
every phase of the election. We discussed many of the questions 
arising under the limitation of expense section; we discussed the 
question of whether foreign companies could use participating and 
nonparticipating policies and whether they were required to con¬ 
form to the provision as to standard forms. We discussed the 
rights of Hylic, as it was called in the Hew York Life, and we 
discussed the fire insurance situation. It is, of course, very 
difficult to draw the exact line between the discussions involving a 


♦ 


Testimony of Me. Mayee. 


641 


law and those involving policy, but there were a good many ques¬ 
tions, I should say, in regard to the election which involved policy. 

Q. What question was first called to your attention with respect 

to the election, as you recollect? A. Oh, with respect to the 
election ? 

\ 

Q. les. A. TV ell, there was a multitude of details. I have a 
little memorandum that I would like to consult. 

Q. Yes. A. (Continuing) Because my memory is not as ac¬ 
curate as Mr. Kelsey s. I think that the first definite discussion, 
as distinguished from general discussions, that Mr. Kelsey and I 
had with each other, was when Mr. McIntosh, the general solicitor 
of the New York Life, came to Albany on June 7, 1 906. We then 
took up the Election Law or the provision relating to the Election 
Law, and went over it in great detail, and I have here a memo¬ 
randum which has refreshed my memory, and I will briefly recite 
some of the questions. The question as to what was meant 
by the requirement under the law that the names of the policy¬ 
holders shall be arranged on the lists alphabetically. The question 
there asked was whether they should be put in the order of the 
first letter of the surname, or whether they should he alphabetized; 
that is to say, the alphabet followed in each letter, so that a man’s 
name which started with Ab should follow Aa. We discussed, as 
Mr. Kelsey has testified, the meaning of the requirement as to 
general agencies in every state, whether it meant every general 
agency or at some central locality. 

Q. State to the Committee, General, whether upon each one of 
these subjects there were differing views and formal arguments by 
lawyers and those engaged in it. A. That was at a later time. 

Q. Oh, well; go on. A. Mr. McIntosh had a memorandum of 
all the company’s general agencies all over the world, and the 
Superintendent and I examined those. The questions in that 
regard have been referred to by Mr. Kelsey. At some places they 
would not have geenral agencies, while at others they would. 
Some places general agencies lapped over, and he was specially 
desirous, as all of them were, to whom I shall refer later, that 
there should he no error, so that the election, however it resulted, 
would not be the subject-matter of controversy in the courts. Then 
the question was brought up as to whether the ballot of foreign 
countries should be solely in the English language, or whether the 
statute would permit it to he in other languages. Then we had 
the question rr* what votes should be counted, whether a mail vote 


i 


642 


Senate Judiciary Committee. 


or a vote by proxy of the same policy-holder. The question of 
whether or not the Election Law authorized challenges on the day 
of casting the vote, and on that question we had quite a discussion, 
quite a difference of opinion. The question as to whether a vote 
should be cast under proxies. We discussed, I may say, the pro¬ 
visions of the law relating to the election very fully, in addition 
to what I have specifically named. 

' Q. That was under the interpretation of the various provisions 
of section 94 ? A. Yes. 

Q. Do you recollect, Mr. Mayer, an occasion when you met Mr. 
Kelsey in New York in June,— on June 15th? A. Yes. 

Q. State the circumstances and the conversation that you had 
with him at that time ? A. He called at the New York office of 
the Attorney-General in regard to a Department matter, and he 
told me that he had an arrangement to meet Senator Armstrong 
and Mr. Hughes that evening. He said that he thought, in ad¬ 
dition to what might be my opinion of the law as Attorney- 
General, as reading the statute and construing it as the Attorney- 
General, that the matter was so important that he should be 
advised of the views of the Armstrong Committee and of the 
purposes they desired to accomplish and their intention, and that 
he thought for that reason that it was a very desirable thing to 
discuss the law and seek light and get information from these 
gentlemen. I agreed with him. I afterwards was told by him 
that he had had the interview; that it was an extended interview, 
and that he — he told me, in substance, the conclusions as to legal 
questions, which he has testified to here. 

Q. Did this meeting with Mr. McIntosh on June 7th, take place 
in Albany or New York? A. In Albany. 

Q. Did you at any time have a conference at the — either in 
Albany or New York, at any other time when there appeared 
before you lawyers in respect to arguing questions presented and 
arising under section 94? A. I think it was on June 28th — 
well, no; that was not the date; it was some other date. June 
28th was another conference with Mr. McIntosh; but on a date 
which I cannot exactly remember, there appeared by arrangement 
of Mr. Kelsey, at my office, Mr. McIntosh,- 

Q. In New York or here? A. In Albany. 

Q. Yes. A. Mr. McIntosh, representing the New York Life; 
Mr. Louis Marshall, representing the International Policy-holders’ 
Committee; and Mr. Bert. Llansom, now the Third Deputy Police 




Testimony of Mr. Mayer. 


643 


Commissioner, representing, I think they called it, the Mutual Life 
Policy-holders’ Association. At any rate, it was one of the asso- 
ciations in opposition to the Administration ticket. That was an 
extended interview, lasting, I should say, not less than two hours* 
Shall I state the substance ? 

Q. Tes, state the substance of what transpired at that time. 
A. At that interview various views were advanced in regard to 
the election. Mr. Kelsey, as I recall it, had a proposed form of 
ballot or official statement. I think that there was not a single 
point of agreement between the contending parties. My recollec¬ 
tion is, for instance, that Mr. Marshall contended that there should 
be a circle, upon the same principle as the circle at a general 
election. Mr. Kelsey objected to that, and pointed out that that 
circle was peculiar to this State, and probably a limited number 
of communities, and that if that went to other states, and espe¬ 
cially abroad, it might confuse. There w r as a discussion, as I 
recall it, as to whether there should he a space left between the part 
of the ballot where the tickets and — that is, the names of the 
candidates — and the signature of the policy-holders. Kow, that 
seems at this juncture to be a very small matter, but that was the 
occasion of very spirited discussion and sharp difference of opinion, 
some contending that no such space should be left, and others 
that it should. Mr. Kelsey expressed the view that there should 
be a space left so as to give the policy-holder a full opportunity 
to write anything he pleased which might indicate Iris intent. 
There was discussion as to the form of type, and the manner 
in which it should strike the eye. There was discussion as to 
which part of the ballot the various details should appear on, 
such as the signature of the subscribing witness. There was a 
good deal of discussion that went into such details, which were 
regarded by all of these men as very important, as to whether 
certain printing should be in black face type and larger type than 
other printing, and the like. There was a very spirited discus¬ 
sion, not then determined, as to where, relatively, the administra¬ 
tion ticket should be, and, therefore, where the others should he; 
and there was not a line or a word upon this ballot that was then 
presented as a draft that was not the subject-matter of argument 
and difference. 

Q. State whether or not the discussion reached an agreement 
between all of the parties who were there and engaged in it. A. 
It reached no agreement. I said very little myself. I engaged in 



644 


Senate Judiciary Committee. 


the operation, for once, of listening, and at the end of the inter¬ 
view Mr. Kelsey said that he had listened to the arguments and 
he considered them, and took them lip later with me. The phrase¬ 
ology at that time under the heading “ Instructions for use of state¬ 
ment as a ballot ”- 

Q. That was instructions to voters ? A. Yes, sir. They were 
drafted by him, and submitted to me on the questions of law — 
not in any formal way; he simply said, I have drafted this and I 
would like you to look it over. 

Q. Was that after or prior to the conference? A. That was 
prior to the conference. 

Q. Did you see him again after this conference ? A. Yes, sir. 
I went away to the mountains, and later on when I came back — 
I was constantly running back and forth, and I cannot fix the 
date — I was surprised to find a new draft which Mr. Kelsey had 
made, and which involved or incorporated some of the suggestions 
made at the hearing and then some changes of his own. I regret 
that the first mentioned draft is not here, or, as I understand it, 
no copy was kept of it, because there are several details in which 
it differed from the final draft. 

Q. You do not now recollect any language which appeared upon 
the face^of that ballot which was not the subject of controversy 
either by the International Policy-holders’ Committee or by the 
Administration, so-called? A. No, I do not; and I may say in 
this connection that the phraseology of this ballot was analyzed 
down to whether a And ” should be used or “ Or ” should be used, 
and the very smallest detail and even some of the smallest things, 
as they appear now, were very important then, and are important 
now, and were gone over with great care; and I took no part in 
the phraseology; I only took part in the interpretation, as I un¬ 
derstood it, of the law. 

Q. Well, the last ballot which became the final ballot, did you 
have any participation in that? A. Ko, that I had no partici¬ 
pation in at all, excepting as to such views and advice as I had 
given upon the law previously, which were incorporated in it. 

Q. Now, I direct your attention, General, to the question of 
Inspectors. Do you recollect with respect to that? A. Yes, 
there were several questions in that regard which were discussed. 

0. By whom? A. By Mr. Kelsey, with me. 

Q. State the subject of that discussion. A. Why, prelimi¬ 
narily, I may say, that that was brought up in one of the Me- 



Testimony of Me. Mayee. 


G45 


In tosh conversations, and I don’t know but what others may have 
spoken about it; but Mr. Kelsey had a conversation with me in 
which he said this. “ Now,” he said, “ I think that there ought 
to be a small number of inspectors.” lie said, “ If we have a 
large number it will lead to confusion and trouble. I want to 
get a small number of good men.” He said, “ It is going to be 
very hard to get good men because the selection is limited.” 

Q. The statute required how many ? A. Three. 

Q. Yes, go ahead. A. Now, that conversation, as I place it, 
did not mention the number five and was before these conferences 
with the lawyers to which Mr. Kelsey has testified. He also dis¬ 
cussed with me at some stage of the proceeding — the statute 
says no! less than three — 

Q. Yes. A. (Continuing) He also discussed with me the mat¬ 
ter of inspectors employing the accountants and employing the 
clerical force. He said that he had decided that that was the only 
wise and sensible way in which to handle the situation, but that 
some question had been raised as to its legality. I am inclined to 
think lie said that some of the counsel of the International Policy¬ 
holders’ Committee had raised that question. And Kelsey said 
that so far as his views were concerned, if he could get a small 
number of inspectors — I think this conversation was after he had 
heard all the counsel —• I think in this conversation he said, “ say, 
five,” have them pass upon the question; then have accountants 
and then have clerical help, and we will get through much quicker 
and much better. He also discussed with me the question of com¬ 
pensation. “Now,” he said, “I have got to pay a reasonable 
amount to get any kind of men at all, and not men who merely are 
looking for jobs,” and at the same time he said, “ I don’t know 
how long this election will last; I don’t know how many votes are 
going to be cast, and I cannot see — predict where it is coming 
out, and I don’t want to pay a price so large or regulate a price so 
large that it will be a heavy burden on the policy-holders.” “ My 
own idea first ”— I am quoting Kelsey — “ was $20, but some 
of the men go as high as $100 a day and,” he said, I have 
thought it over and I think I will strike it right at $35 a day, 
because a fair, decent, capable man will probably be willing to 
undertake it at that sum. I doubt whether I can get good men for 
less. I do not want to pay more, because it will be a heavy burden 
op the company.” 





Senate Judiciary Committee. 


640 



Q. These views which lie expressed to you were his own? A. 
Absolutely. 

Q. Did you take up the subject with him with respect to the 
question of how a review should be had of the questions which 
would be passed upon by the inspectors? A. Yes, I did. Mr. 
Kelsey said to me that as he viewed the law there should be a 
review direct by the courts. lie said that in any case he regarded 
it as a very serious matter for the Superintendent to assume to 
make rulings upon appeal from the inspectors, or to make rulings 
for the inspectors. Tie said that the contest had been very bitter, 
and that he thought it was very important that the Department 
and himself should not be placed in the position of partisans; 
that he would ultimately have to supervise these companies, and 
that if he attempted to make rulings, no matter what the rulings 
were, there was bound to be grave criticism which would only 
tend to excite the public; that that was his administrative view, 
but that in any event he thought the law comprehended an appeal 
direct to the courts, and I agreed with him. 

Q. Did he express his view about occupying the position — or 
the necessity of occupying a position of impartiality in that 
regard? A. lie emphasized that very strongly. 

Q. Do you recollect a hearing in your office with respect to 
the construction of section 102, in which the Aetna, the Travel¬ 
ers and the Connecticut Mutual was represented ? A. Yes. 

Q. State what that was anrl the circumstances connected with 
it ? A. I may precede that with the statement that earlier in 
the summer Deputy Attorney-General Graham, in the name of 
the Attorney-General, I think, had held that the foreign com¬ 
panies would be required to conform with the provisions relating 
to the standard form of policy, and also would not be permitted 
to write both participating and non-participating policies. That 
was Mr. Kelsev’s view, Mr. Kelsey stating to me that he thought 
Hat was a just and fair and equitable course in regard to our 
domestic companies. That led to a good deal of discussion. A 
hearing was requested and had, either in the latter part of August 
or early in September, at which Senator Bulkley, the president 
of the Travelers of Connecticut, was present, Mr. Sperry, counsel 
for the Aetna, and in this instance, for the Connecticut Mutual, 
and Mr. William Brosmith, counsel for the Travelers. Mr. Kelsey 
was present at that occasion. There was a very extended argu¬ 
ment, and decision was reserved by me and I finally determined 


J 


Testimony of Me. Mayer. 


647 


that tlie foreign companies were not required to issue— to elect, 
but could issue if they pleased, both participating and non-partici¬ 
pating policies, and were not bound to issue our standard forms. 
1 based that determination upon the reading together of a num¬ 
ber of the sections of the old and new law, and more especially 
upon the fact that the original draft of the law — the Armstrong 
law, had not the word u Domestic ” in, while the final draft 
and the statute had the word Domestic ” in, and I believed that 
the word domestic was a word of limitation and was meant not 
to include foreign companies. 

Q. Do you know whether a different view had been expressed 
by Mr. Graham, your deputy, prior to that time? A. Yes, it 
had been. 

Q. And that view was reversed? A. Yes. 

Q. Did you write an opinion on that subject? A. Yes, a 
formal opinion. 

Q. And as requested by whom? A. By Mr. Kelsey. 

Q. Do you recollect whether or not you had any communication 
upon that subject with Senator Armstrong? A. I think I told 
Mr. Graham to get from the Senator, if he could, his view as 
to what did happen in reference to the change from the original 
draft. My recollection is that Mr. Graham reported to me that 
the Senator said that my conclusions were correct, although the 
Senator expressed his regret that the amendment had been made, 
and was inclined to the view that a more fair and proper disposi¬ 
tion would have been the original situation, which would have 
placed the foreign companies upon the same basis as the domestic 
companies. 

Q. Do you recollect about this time of interviews with Mr. 
Kelsey with relation to inquiries and correspondence and interpre¬ 
tation of the amended law, and the necessity for a quick response ? 
A. Yes. The companies here and outside of the State were shap¬ 
ing up their affairs and accommodating themselves to conform 
with the details of the new law, which, in the main respects, went 
into effect on January 1st, 1907, and as has already appeared, the 
correspondence was voluminous and many of the letters required 
an interpretation of the law, and there were many conferences 
resulting in such interpretation, between Mr. Kelsey and myself. 

Q. State whether or not those questions which were presented at 
that time were such as required immediate determination? A. 
Yes, Mr. Kelsey felt they did and I felt they did. I felt they 


648 


Senate Judiciary Committee. 


were of immediate and prime importance so that the actuarial and 

administrative departments of these companies should not be 
delayed. 

c/ 

Q. But do you know whether or not immediate decision was 
made in the main, of those questions ? A. I should say that there 
was such a legal decision, that is, very prompt decision. 

Q. By you or by the Superintendent or both? A. Questions 
of policy were by him; questions of law were, of course, ulti¬ 
mately by me in my official capacity. 

Q. Do you recollect — I call your attention again now to the 
fire situation. Do you recollect in June of having a conversation 
with one of the managers of the large companies ? A. Yes. 

Q. Where was that ? A. I was at the Appellate Division of 
the First Department waiting to reach a case some time in June. 
There called upon me the manager of one of the large foreign 
companies. He called with his attorney. I knew his attorney, and 
he introduced this gentleman to me. He was very much disturbed 
and said that the condition was as follows. He said, “ We 
have very large resources abroad. You know of our company. 
It is one of the old companies of the world, but if we seek to pay 
the California losses out of our Hew York capital -—” 

Q. Is that Hew York or United States? A. “ The capital of 
our United States Branch, and out of the securities in the hands 
of the United States trustees, we will impair our Hew York cap¬ 
ital. If we are unduly hastened or unfairly hastened, we shall 
be compelled to sell our foreign securities abroad.” The company 
was a company whose home is in Scotland. He said, mentioning 
certain well-known foreign securities, “ Of course you know those 
securities cannot be deposited here, and if we dump them on the 
market and other companies dump theirs, there will be a great loss 
on these securities, which will be an unnecessary loss. It may 
involve several hundred thousands of dollars, and I would not 
wonder, a half a million dollars,” and he said, “ We are very anx¬ 
ious to see whether the Department will not solve the problem by 
accepting a resolution passed by our Home Office, that it will as¬ 
sume the San Francisco losses, and we will pay those foreign 
losses from our foreign treasury, and leave our capital here unim¬ 
paired.” He said, “ Tn that way we will avoid great loss, and 
besides that, if we seek to send over securities receivable under 
the Hew York law, or the cash,” he said, “ this cash may lie in 
Hew York for a long while before the cash is actually paid out 



Testimony of Me. Mayer. 


649 


upon asceitained and proved losses.” u Now,” lie said, (( we do 
not know Mr. Kelsey. What kind of a man is he? Is he the kind 
of a man to rush in and create trouble and disaster, or is he the 
kind of man to be sensible and conservative? ” I said, u I think 
Mr. Kelsey is the most self-contained, conservative, level-headed 
man that I know, and I think he will see the situation at once.” 

Now,” I said, “ you had better go up to Albany and see him. 
I cannot pass upon the policy of his Department, and if he refers 
the question to me, I will take up the legal questions involved, if 
there are any.” He asked me for a letter of introduction to Mr. 
Kelsey. I said, “ You do not need a letter of introduction to 
Mr. Kelsey.” I said, u If you have any fair business proposition, 
from my knowledge of him, all you need do is to walk into his 
office and tell him your business and you will get an audience.” 
And with that this gentleman left. Later the question involved 
was talked over. Mr. Kelsey said that he thought that that policy 
was a wise one, and, of course, recognized the situation that there 
was — that where these foreign corporations were solvent, it was 
most unfair and most unwise to force any course which would re¬ 
sult either in a technical insolvency here or any loss upon securi¬ 
ties, and he asked me — he said that that was the course he wanted 
to pursue, and asked me what my view was of the law, and he 
hoped that there was not any technical interpretation to be applied 
in that situation; and I told him that I was not going to study 
very long on the law in that situation; that I would take the 
responsibility of the legal end of it, if he was willing to take the 
responsibility of the administrative end, and that he did, and that 
I did, and the result was that there was no sale of securities in 
this or any other company, and the feared losses were averted. I 
may say that in that conversation this gentleman called my atten¬ 
tion to the fact that many other foreign companies of undoubted 
solidity were in precisely the same position. 

Q. The impairment of any capital here was based upon what 
the losses were as they then appeared ? No losses had been estab¬ 
lished at that time, had they, by settled proof? A. Well, I should 
say, very few, if any. 

Q. And the losses that had been incurred were in process of 
development at that time ? A. Yes. 

Q. Do you know whether the insurance company with which 
you held this conversation — in respect to which you held this con¬ 
versation, has paid all of its California losses, or that they are 



650 


Senate Judiciary ( YmmitTeR. 


in process of legitimate adjustment ? A. Oh, yes. It met its 
obligations honorably. It is a company with large home re¬ 
sources. 

Q. Did you have any further conversation with respect to the 
fire situation, that you recollect? A. With Mr. Kelsey? 

Q. Yes, after that time? A. Well, I had constant — frequent 
conversations about questions coming up, but unless I have made 
a memorandum I do not recall any particular conversation, that 
is, that would go outside of the routine. 

Q. And you do not recall any to your mind now of which you 
have definite recollection ? A. Ho, nothing that I should say was 
of salient importance. Of course- 

Q. Did you at any time after this have any conversation with 
Governor Higgins with respect to this matter? A. Yes, I did. 

Q. Where and when ? A. At the Hotel Kousseaumont at Lake 
Placid, in the Adirondack Mountains. 

Q. At what time? A. It was, I think, the second or third 
Sunday of August. The Governor called me up on the long dis¬ 
tance telephone. I was then at my camp in the Adirondack 
Mountains near the village of Saranac Lake. He asked me 
whether I could come over to see him as he desired to consult with 
me on an important matter. I said of course I could, and I asked 
him whether it would be agreeable if I came over after the mid¬ 
day meal. He said that would be agreeable. I drove over from 
Saranac Lake village to the Kousseaumont at Lake Placid, arriv¬ 
ing there, I should imagine, at half-past three or four o’clock. I 
was with the Governor alone until seven. He said that the 
occasion of his asking me to come over was to get my advice with 
regard to designating the Appellate Division of the Third Depart¬ 
ment to hear the appeal from the order of Mr. Justice Howard in 
the case of the People ex rel. Shook v. Kelsey. That was a case 
in which Shook on behalf of himself and three others had made a 
motion for a peremptory writ of mandamus, demandings the 
Superintendent to take off four names from the Administration 
Ticket in the Mutual Life. It had been decided adversely to the 
relator by Mr. Justice Howard, and in favor of the view of the 
Superintendent and of myself. The Governor said that Mr. 
Marshall, of counsel for the International Policy-holders’ Com¬ 
mittee, had been to see him, Mr. Marshall having a camp on the 
lower Saranac, and had asked him to designate or require the 
Appellate Division of the Third Department to hear the appeal 



Testimony of Mr. Mayer. 


651 


from that order, and more especially in view of the fact that the 
Appellate Division was about to convene to hear the apportion¬ 
ment cases. The Governor asked me my judgment about the 
matter. I told him that I thought that as the Appellate Division 
was getting together anyway, that it was advisable to authorize or 
designate them to hear this appeal; that these international policy¬ 
holders, under the law, would be required to file their lists of 
nominations by the 18th of September, and that there had been 
such constant newspaper exploitation of this election matter and 
so many misleading accounts and statements, and especially in 
reference to this particular matter, and that the public had been 
led to believe that the Superintendent, as I viewed these articles, 
was doing something not in accordance with the law,—- that the 
sooner we got it decided by the Appellate Division and by the 
Court of Appeals, if need be, the better, and I advised that that 
course be taken. It was subsequently taken. The Governor said 
to me, “ Well, I think you are right. I think that is sound.” 
He said, “ There has been a great deal going on; there has been a 
good deal of misunderstanding and misstatement and misappre¬ 
hension.” Of course, I do not mean to give the exact words, but 
that is the substance of that conversation. He said, “ We have 
been through a very serious time, and we are in one now, and we 
are going through one.” He said, “ I think it is very important 
to do anything that is possible to quiet the public mind.” He 
said, “ Between the life insurance situation, and this terrible 
catastrophe in San Francisco, involving the fire insurance situa¬ 
tion, we have had a time such as has not been known, and it has 
certainly given me a great deal of worry and concern.” He said, 
“ It is a very fortunate thing that the Superintendent of Insur¬ 
ance is a man like Otto Kelsey, who can keep his feet on the 
ground.” Then we had a talk about lots of other things. 

Q. Anything that is relevant to this situation? A. Ho, except¬ 
ing that I have boiled down the conversation so far as this situa¬ 
tion was concerned. I should say that we talked about many 
details in reference to it, certainly not less than half an hour, 
and I have a very distinct recollection of his statement in regard 
to the mental attitude and character of Mr. Kelsey. 

Q. General Mayer, I would ask you,* taking everything into 
consideration of which you have knowledge in connection with 
the business which you have described, and in connection with 
the interpretations of the law — of the new Insurance Law, to 


652 


Senate Judiciary Committee. 


state whether or not in your opinion Mr. Kelsey exhibited a com¬ 
prehensive grasp of the operative effect of the new law, and the 
needs and necessities of the situation? A. I should unhesitatingly 
say that he did. He exhibited a knowledge of the law, the stat¬ 
utes, that seemed to me unusually good for a man who was not 
an actively practicing lawyer. He was very firm, very strong. 
Whenever I asked a question, either to guide me in my legal in¬ 
terpretation as bringing in the practical side, or sometimes -for 
general information, he exhibited a most excellent knowledge. 
Especially did I find that he was cool, level-headed, strong, re¬ 
sisting any course that he thought was unwise. If I may be per¬ 
mitted to say so, his difficulty is that he is a man of rare modesty, 
and the failure to assert his self-opinion is construed at times as 
indicating that he is not a set man, but he is a man of the most 
solid purpose that I ever met in my life, and I speak from daily 
association while he was Comptroller and while he was Super¬ 
intendent of Insurance; because, although I knew him for many 
years, I never knew him at close range until then. 

Q. Is there any other matter to which I have not directed your 
attention, that you desire to mention ? A. Only one, in a gen¬ 
eral way. 

Q. Well, state it. A. And that is this, that no man — if I 
may be permitted to say it, who was not a part of that situation, 
can have any conception by mere statement in words of the anxiety 
involved in the San Erancisco fire situation. The papers from 
time to time were filled with rumors; in some instances they men¬ 
tioned the names of specific companies, and that situation was the 
most anxious situation with which I think any set of public officers 
ever had to deal, and I do know that Mr. Kelsey told me, in 
response to inquiries made from time to time, when I would see 
some rumor and be fearful that something would happen, that 
he was keeping in daily communication with what he termed the 
Hew York office; that he was running down every rumor, and 
that all he had to do was to keep steady and he felt that we were 
going to come out of the situation all right; and I want to empha¬ 
size, if I may be permitted to, as a member of that administration, 
the fact that no man outside of Mr. Kelsey and the late Governor 
and myself, can ever have a conception nor am I able in words to 
give any conception of the grave danger that was presented and 
averted, and all the terrible worriment and anxiety that was on 
the shoulders more especially of the Superintendent and of the 
late Governor in that respect. 



Testimony of Mr. Sheldon. 


653 


Q. Ts (here any other subject that you desire to touch upon? 
A. That is all. 

Hr. Hatch. That is all I desire to ask General Mayer. 

Further hearing adjourned until to-morrow, Friday, April 12 
1907, at 11:30 a. m. 


Proceedings Before the Senate Judiciary Committee in the Senate 
Chamber on the Message of the Governor Dated February 
20th, in Relation to the Superintendent of Insurance. 


Senate Chamber, Capitol, 

Albany, April 12, 1907. 

Proceedings Before the Senate Judiciary Committee in the Senate 
Chamber on the Message of the Governor Dated February 20th, 
in Relation to the Superintendent of Insurance. 


Senator Davis (Chairman) presiding. 

The Chairman called the Committe to order at 11:30 a. m. 

George P. Sheldon, being duly sworn, testifies as follows: 

* 

Direct examination by Mr. Mayer: , 

Q. Mr. Sheldon, what is your present position? A. I am 
president of the Phenix Insurance Company. 

Q. And is that a domestic company ? A. Yes, sir; a company 
organized in the State of Yew York. 

Q. How long have you been president of the company? A. 
Nineteen years. 

Q. What is the capital of the company, the authorized capital ? 
A. Now one and a half millions. 

Q. And the surplus ? A. The surplus is a little more than 
that, $1,600,000. 

Q. And you were president of the company at the time of the 
San Francisco fire ? A. I was; yes, sir. 

Q. Are you familiar with the situation connected with that con¬ 
flagration ? A. I was not in San Francisco, but I knew about it. 





654 


Senate Judiciary Committee. 

Q. You knew the effect of the situation out there? A. Yes, 
sir; very well, indeed. 

Q. Now, for the benefit of the Committee, may I ask you to 
describe the situation immediately following the fire ?— directing 
your attention particularly to the matter of records, information 
and the like as to loss, salvage and so on ? A. Immediately fol¬ 
lowing the fire of course we were unable — not only myself, but 
companies generally — were unable to estimate their losses at all 
because many of us, as for example myself, we had the San Fran¬ 
cisco records kept in Chicago; they were all in my Chicago office, 
and with the exception of those from San Francisco for the two 
months preceding; but the last two months had not been trans¬ 
mitted from San Francisco to the Chicago office; consequently 
we had no record of the last two months of the business except 
such as were in San Francisco. At that time it will be remem¬ 
bered the telegraphic lines were down and we were unable to have 
communication with San Francisco for two weeks, I think it was, 
after the fire; and then it was very imperfect and insufficient 
communication which was then given. 

Q. Was it possible within the period you have just mentioned 
for even you to know where your company stood in respect to those 
losses? A. I knew possibly all that anyone else knew, that was 
that we had an outside figure; but I could not give a detailed 
estimate of my losses at that time. Of course estimates were made 
on the losses, based on the amount of business done by the com¬ 
panies during the previous year, which were figured on the busi¬ 
ness done during 1905; and then the estimate of companies’ losses 
was made up roughly, based on that assumption, assuming that 
they were practically a total loss. Those estimates gave outside 
figures. 

Q. Do you remember what statements' were required by the 
Insurance Department of this State ? — not the total — first, do 
you remember that there were statements? A. Yes, there were 
statements called for by the Department in the early part of 
May or early in June, the first statement; and another statement 
was called for by the Department in the latter part of October or 
toward the 1st of November, requiring the companies to give a 
sworn report of their conditions as of October 31st. 

Q. And do you remember the statements requiring a report or 
statement which was sent out in the summer time? A. Yes, sir; 
in June. 




Testimony of Me. Sheldon. 1 ' 655 

Q. And do you remember of inquiries had at almost the be¬ 
ginning of the situation which called for an unsworn statement? 

A. Yes, sir. 

Q. So is it your recollection, Mr. Sheldon, that there were 
three ? A. Three, yes, sir. 

Q. Now, during this period subsequent to the fire did Mr. 
Hunter or Mr. Vanderpoel call upon you ? A. Oh, yes, a number 
of times, both of them. 

Q. Did they have telephonic communication with you? A. Yes, 

sir. 

Q. Now, excepting from my question the particular interview 
with Mr. Hunter, and referring now to the general character of 
the interview, will you state to the Committee what was the char¬ 
acter of the interviews with respect to this subject-matter? A. 
They came to me, as I assumed they did to others, to get infor¬ 
mation as to the condition of the companies, following the fire, 
and made inquiries about a number of companies whose names 
had been mentioned in connection with their condition in certain 
newspaper reports; and I would, if I did not have the information* 
secure the necessary information and communicate it to them. 

Q. Now, then, if I understand you, in addition to the informa¬ 
tion they ashed you in regard to your own company, they also 
asked you in regard to other companies ? A. Yes, sir; not only 
New York companies, but companies outside of this State. 

Q. In what manner were you possessed of information as to 
other companies? A. From the position I held as president of 
the organization of companies I was communicating with the other 
executive officers from time to time, and we were exchanging in¬ 
formation between one another, information as to our respective 
conditions, and in that way I was made acquainted with the pos¬ 
sible or probable losses of a large number of companies. 

Q. What position is that you refer to? A. I am president of 
the Eastern Union, and I am also chairman of the committee on 
losses of the National Board, which represents practically all the 
companies. 

Q. What is the Eastern Union? A. It is an organization of 
some forty companies. 

Q. And by virtue of that position you were able to secure 
information ? A. That was one of the channels, yes, sir. 

Q. Did you give or did you obtain and then give to either Mr. 


650 


Senate Judiciary Committee. 


Hunter or Mr. Vanderpoel all of the information they asked 
for ? A. I did; freely. 

Q. When you gave it to them did you feel that that informa¬ 
tion would be properly used ? A. Oh, yes; I have known those 
men for a long time. 

Q. As far as you are (concerned, and as president of this 
Phenix Fire Insurance Company and as president or head of the 
Eastern Union, did you have confidence in both of these men ? 
A. Yes, sir. 

Q. Was there anything that had occurred up to the time of 
this fire, as far as the fire insurance business is concerned, that 
affected your confidence in these - men, from your personal con¬ 
tact with them? A. Ho, sir; and their relations with my own 
company and with other companies knowing them, I think I 
voice the general sentiment of the officials of insurance companies 
in saying that they had the confidence of all the fire insurance 
company officers. 

Q. During these months immediately following the conflagra¬ 
tion at San Francisco, was there anything that occurred, as be¬ 
tween you and Messrs. Hunter and Vanderpoel, that decreased 
your confidence? A. Ho, sir; I think the discretion they showed 
rather increased and justified the confidence. 

Q. How was this information sought and given, as you have 
stated, from time to time, of a character that you felt the source 
of it should be confidential — that is to say, the fact that you 
gave the information should be held confidential ? A. It was 
understood that it was to be confidential. • 

Q. Did that confidence include the Superintendent of Insur¬ 
ance ? A. Yes, sir; it was for the Department of Insurance. 

Q. And it was understood that the information should not be 
stated as coming from you; is that correct ? A. That is correct. 

Q. And it involved facts concerning other companies? A. It 
did. 

Q. Is that right ? A. Yes, sir. * • 

Q. How during these days from the time of the fire and these 
reports from time to time, you were giving information, would 
you have felt that you could give such information to a stranger 
or to a new employee of the Department ? A. I should have freely 
given any information as to my own company, but I should not 
have felt as free to talk about other companies under those circum¬ 
stances. 



I 


Testimony of Mr. Sheldon. 


657 


By Senator Baines: 

Q. In the matter of discretion, what do you imagine would 
have been the effect on the general situation following the San 
Francisco fire, had the information which was communicated to 
these men in the early part, soon after the fire, what do you 
imagine the effect of that information would have been on the 
general public ? A. If the condition of all the companies had been 
officially stated and made public, it would practically have pre¬ 
cipitated what we call an insurance panic, and not only an in¬ 
surance panic, but it would have been felt by all the important 
interests, for to take the city of Hew York, you will see that the 
fire insurance companies are largely connected with the great ware¬ 
house interests. Loans would have been recalled by the banks if 
statements had been made which were true, and a large number of 
the companies would have been declared insolvent, which were so 
technically, but not actually. 

By Mr. Mayer: 

Q. Of course, that is upon the assumption that the losses were 
as estimated, and not as actually stated? A. They were so largely 
overestimated. 

0. How, in your opinion, and from your long experience are 
you able to state whether a statutory examination, by sending 
in of examiners to any of these companies, would have been a 
practicable method? That is an examination of all the companies 
concerning whom rumors were abroad as to the impairment of 
capital, the magnitude of losses, etc.? A. It would have been 
practically impossible to place all the facts before the examiners. 
There was information which was before the officers of companies 
as to the condition of their own and other companies, but it was 
not information that could have been spread on the public record 
at that time. 

By Senator Baines: 

Q. That included the possibility of raising increased capital, in 
case certain companies needed it; in that case it would have been 
unwise to publish these estimates? A. Yes, sir, it was largely 
because it would interfere with the raising of capital by those who 

desired it. j .. , 


658 


Senate Judiciaky Committee. 


By Mr. Mayer: 

Q. Now, referring once more to the information given by you 
as to other companies, to Messrs. Hunter and Vanderpoel, was 
that information relative generally to salvage, losses, reinsurance, 
and other matters going to ascertain the condition of the com¬ 
panies ? A. Certainly; because all these first statements published 
took into account no reinsurance at all. They were made up from 
the amount of premiums the companies took in the year before, 
taking into account no reinsurance or salvage. 

Q. Now, Mr. Sheldon, I believe it is only since this proceeding 
began, that I have had the pleasure of your acquaintance? A. 
Yes, sir. 

Q. How often have you met Mr. Kelsey ? A. I never met Mr. 
Kelsey but once. 

Q. And that was here? A. That was in his office downstairs. 

Q. And on official business ? A. Yes, sir. 

Q. Now, do you recollect my calling upon you and stating to 
you that the Senate Committee had obtained the power to issue 
subpoenas ? A. Yes, sir. 

Q. Have you come here in response to a subpoena? A. Yes, 
sir; I have. 

Q. And do you recall my submitting to you the statement I 
have referred to, the draft of a document, and asking you to look 
it over ? A. Yes, sir, I remember that. 

Q. Do you remember whether I asked you to inform me as to 
whether that document stated the truth as vou understood it? A. 
Yes, sir; you did. 

Q. And you will tell the Committee what you answered ? A. I 
said it fairly represented the situation following the San Fran¬ 
cisco conflagration. 

Q. Did I ask you whether it would be proper for me to see 
other fire insurance officials ? A. You did. 

Q. Now, I hand you these two papers, which are duplicates; 
first I will hand you this paper (indicating) and ask you if that 
is your signature (indicating) ? A. Yes, sir; that is my signature. 

Q. Are you familiar with many of the signatures upon that 
paper? A. I think I know the signature of all but one or two of 
them. I had occasion at one time to get their signatures to an¬ 
other paper, some years ago. 

Q. Now I hand you another paper which is identical, or a 
duplicate, except in regard to the signatures appended thereto; 


050 


Affidavit of Fi re Companies. 

and I ask you if you arc familiar with most of those signatures? 
A. I recognize every signature on that paper, although I did not 
see any of them sign. 

]\fi. Mayer. I ask to have those two papers marked in evidence. 

(Papers marked exhibits 157 and 158 respectively.) 

Mr. Mayer.— Now, with the permission of the Committee, I 
will read this first one. 

BEFORE THE JUDICIARY COMMITTEE OF THE SEN¬ 
ATE OF THE STATE OF NEW YORK. 

In the Matter 
of the 

Hearing upon the Recommendation contained in the Message of 
the Governor for the removal of Otto Kelsey from the office 
of Superintendent*of Insurance. 

The San Francisco fire, which occurred on April 18, 1906, 
produced a situation of extraordinary gravity. 

At first there was great confusion and uncertainty in regard 
to the nature and extent of losses sustained or the amount of 
insurance carried on property destroyed. This was due to the 
loss of records and papers and the impossibility of readily obtain¬ 
ing correct information, and as a result generally of the situation 
the percentage of loss and of salvage, the value of reinsurance 
and the legal liability of the companies affected, could not at first 
be accurately determined, but only approximated. 

This condition was a matter of very serious concern and pro¬ 
duced in the public mind great uncertainty as to the solvency 
of Very many companies which theretofore had been regarded as 
sound and solvent. 

The enormous amount of credits based upon the business of 
these companies, amounting in the aggregate to not less than 
eight hundred million dollars in New York city, and upwards of 
five billions of dollars in the country at large, made it of the 
very highest importance — indeed created an imperative condition 
— for the exercise of sound judgment and conservative action in 
handling the situation. 

Rumors of all kinds were current, and articles were appearing 
in various newspapers tending to weaken public confidence; and, 
in brief, the situation was the most critical in fire insurance mat¬ 
ters which has occurred in the history of this country. 




600 Senate Judiciary Committee. 

Ilasty and ill-considered action would easily have precipitated 
a panic in which sound and solvent insurance companies here and 
abroad would have been forced to great losses by the sacrifice of 
securities, and many of them forced into the hands of receivers; 
and inevitably would have affected other business interests de¬ 
pendent upon the stability of fire insurance companies. 

The course therefore of the Insurance Department of the State 
of Hew York was a matter of the highest importance to the fire 
insurance companies and their policy-holders, not only throughout 
this country, but in foreign countries whose companies were doing 
business under the provisions of the laws of the State of Hew 
York. 

W e are familiar with the course adopted by the Hon. Otto 
Kelsey, Superintendent of Insurance. 

This course required the sworn reports of the insurance com¬ 
panies under his jurisdiction in regard to various data, such as 
losses, salvage and reinsurance. In addition thereto we know that 
Deputy Robert H. Hunter or Chief Examiner Isaac Yanderpoel, 
or both, made inquiries and sought information constantly from 
the responsible officers of fire insurance corporations as to the 
situation generally and as to facts bearing upon or relating to the 
condition of particular companies. 

In our opinion it would have been impossible to bring the fire 
insurance situation to a successful outcome if any other course 
had been pursued. It required the greatest efforts on the part of 
the fire insurance companies to obtain for themselves approxi- 
matelv correct estimates of losses, salvage and reinsurance and 
other data, and even then there were many open and disputed 
questions as to liability. An examination as permitted by statute 
of the companies affected by the San Francisco fire would have 
been impracticable because of the impossibility of such examina¬ 
tions in less than a long period of time and such examinations 
would not have thrown any better light upon the situation than 
the sworn reports required by the Insurance Department be¬ 
cause of the lack of information above stated as to losses, salvage 
and the value of reinsurance and of outstanding questions of law 
and fact as to liability. 

What the situation demanded was constant information ob¬ 
tainable from the fire insurance company officials and other re¬ 
liable sources and constant inquiry of them, which inquiry was 
made and information given, so far as the fire insurance com- 


Affidavit of Fire Companies. 


661 


pa hies were concerned, to the Superintendent- of Insurance 
through Mr. Hunter or Mr. \ anderpoel, or both. The direction 
and requirement of the Superintendent of Insurance as to the 
sworn reports resulted in giving to the Superintendent of Insur¬ 
ance the information possessed by the insurance companies them¬ 
selves as the situation developed, and as from time to time the 
insurance companies provided for the liquidation of ascertained 
losses. 

Pursuant to the policy of the Insurance Department and in 
obedience thereto, large sums of money were paid into the treas¬ 
uries of the fire •insurance companies, and this policy had the 
effect of protecting the policy-holders and the credit of the com¬ 
panies and saved many of them as solvent going concerns, whereby 
losses have been and can be met, and have been adjusted or are 
in process of legitimate adjustment. 

In all upwards of eighty millions of dollars of fresh capital have 
gone into the treasuries of various fire insurance companies here 
and abroad, and only one company of this State has been placed in 
the hands of a receiver. 

During the whole of this period the Superintendent of Insur¬ 
ance exhibited complete and comprehensive grasp of this grave 
and anxious situation and we have no hesitancy in affirming that 
owing to his sound judgment, tact and business sense an extraor¬ 
dinary and critical period was safely passed and a panic averted. 

From our knowledge of the conditions resulting from the San 
Francisco fire and our knowledge of the manner in which the 
Insurance Department dealt with the same under the superin- 
ten dency of Mr. Kelsey, we bear testimonv to the fact that he 
acted in such manner as accrued in the highest measure to the 
benefit of the business world at large and to the credit and honor 
of the State of Mew York. 

Marshall S. Driggs, President, Williamsburgh City Fire Ins. Co. 
W. W. Underhill, President, United States Fire Ins. Co. 

M. J. Ennis, President, Peter Cooper Fire Ins. Co. 

Mew Yonk Fire Ins. Co., by Chas. A. Hull, President. 

E. G. Snow, President, The Home Insurance Co. 

Harold Herrick, President, Miagara Fire Ins. Co. 

The Morth River Ins. Co., by Vice-President F. II. Crum. 

D. J. Burtis, President, Empire City Fire Ins. Co. 

E. C. Jameson, President, Globe & Rutgers Fire Ins. Co. 
Stuvvesant Ins. Co., C. A. Garthwaite, Secretary. 


662 


Senate Judiciary Committee. 


German-American Insurance Co., Wm. A. Kremer, President. 
Geo. P. Sheldon, President, Plienix Ins. Co. 

Thoo. H. Price, President, Eagle Eire Co. 

Pacific Eire Ins. Co., Frank T. Stinson, President. 

Germania Fire Ins. Co. by Hugo Schumann, President. 
Westchester Fire Insurance Company, by M. O. Brown, Secretary. 
P. Emory Warfield, President, Hanover l ire Insurance Company. 
A. H. Wray, U. S. Manager, Commercial Union Assurance, Ltd., 
and Palatine Insurance Co., Limited, London, England. 

Clias. II. Post, U. S. Manager, Caledonian Insurance Co., Edim 
burgh. 

J. Montgomery Hare, U. S. Manager, Norwich Union Fire Office 
of England. 

Sun Fire Office, by J. J. Guile, Manager. 

Louis P. Bayard, Assistant Manager, Phoenix Assurance Co., 
Limited. 

Geo. W. Babb, Manager, Northern Assurance Company. 

Charles L. Case, Manager, London Assurance Corporation. 

Royal Insurance Co., C. F. Shallcross, Manager. 

Hy. W. Eaton, Resident Manager, The Liverpool & London & 
Globe Insurance Co. 

E. G. Richards, Manager, by J. F. Hastings, Assistant Manager, 
North British & Mercantile Ins. Co. 

Frank Lock, Manager, Atlas Assurance Co., Ltd. 

By Mr. Mayer: 

Q. Now, Mr. Sheldon, you have heard these duplicate papers, 
each bearing the signatures referred to, and I ask von whether now, 

under oath, before this Committee, the matters therein set forth 

•»>* 

are true? A. I believe them to be so. 

By Senator Baines: 

Q. I want to ask Mr. Sheldon a question, and that is, how this 
San Francisco disaster was considered as compared with the 
Chicago or Boston, fire? A. As far as the magnitude is con¬ 
cerned, the San Francisco disaster was four or five times as great 
as that of the Boston or Chicago fires. 

Q. And in comparison with the effects upon insurance com¬ 
panies as a result of the San Francisco fire, when contrasted with 
the Boston or the Chicago fire, what is the result of such a com- 


Testimony of Me, Sheldon. 


663 


panson ? A. hollowing the Boston and Chicago fires, one hun¬ 
dred companies were wiped out of existence; whereas but very 
few retired after the San Francisco fire. 

By Mr. Mayer: 

Q. And since then you know of only one company in this 
State which has gone into the hands of a receiver? A. Yes, sir. 

Q. And that company was the North German? A. Yes, sir; 
that company was the North German. 

Q. Now, Mr. Sheldon, do you recollect an occasion which is 
especially fixed in your mind when Mr. Hunter called upon you ? 
A. Yes, sir; one in particular. It affected my own company par¬ 
ticularly. 

Q. Now will you tell the Committee, with some detail, if you 
please, the circumstances of that interview? A. One of the lead¬ 
ing papers in New York had published an estimate of the losses 
of companies by reason of the San Francisco disaster, and that 
estimate purported to have been shown to one of the prominent ex¬ 
ecutive officers of one of our large companies in New York, whose 
company was not at all affected by the disaster, and the question 
was apparently put to this officer as to whether this statement 
represented a fair estimate of the losses of the various companies. 
As I was informed afterwards that officer stated simply in rela¬ 
tion to his own company’s estimate, that he considered it fair 
under the circumstances. But the papers published it as if it were 
his judgment that it represented a fair estimate of the condition 
of the companies. 

I saw my company placed at the head of the list, and that it 
was the largest loser, and it was estimated to have had losses 
amounting to about six million dollars. Inasmuch as my capital 
was one million and the surplus was less than three million, it 
made it quite a serious statement, as far as my company was 
concerned. 

I had not been in mv office more than two hours that morn- 
ing before I received a telephone call from Mr. Hunter, and he 
said he had called me up to say — first he said, “Is that Presi¬ 
dent Sheldon? ” and I said “ Yes.” lie said, “ I want to see you 
about that estimate which appears in the morning papers.” I 
said, “I can explain that to you very easily.” He said, “No; 
that he would come over and see me.” I think he told me he had 
received a telephone message from Albany about it. 


664 


Senate Judiciary Committee. 


Mr. Hunter came into mv office and 1 Lad communicated witli 

xj 

tire gentleman who made the statement, according to the paper, 
and he endeavored to correct the statement in the next issue of 
the paper, which the paper was glad to do; then Mr. Hunter said, 
“ If that statement is correct, it wipes out jour company alto¬ 
gether; 7 ’ and I said, “ Mr. Hunter, it is not a correct statement, 
by one-half; my figures up to this time show that our losses will 
not equal two and a half million, and my only question is about the 
reinsurance. This takes no account of $1,800,000 of reinsurance 
which I have effected in San Francisco. I produced before him 
such information as I had bearing on my losses, calling attention 
to the fact that even if the losses were two and a half million, 
that would wipe out my statement of January 1st, which showed 
$2,200,000, but that that was not the real value of those securities; 
because as had been the custom, we had taken full advantage of 
our market securities because we must consider that they fluctuate, 
that they went away up in 1905, and that then they went away 
down again; so that my securities as appeared in the statement of 
January 1st were undervalued nearly $600,000; so that I had an 
actual surplus on the 1st of January which would have shown 
nearly three million dollars — $2,900,000, and the first four 
months of the year had been very profitable indeed, and so I had 
a surplus at the time of the San Francisco conflagration of nearly 
or quite three million dollars, or a little over three million dollars, 
and I communicated that to Mr. Hunter, stating that our losses 
would fall unquestionably within the three-million-dollar limit, 
and I thought within the two and a half million. That is all I 
can say. 

By Senator Raines: 

Q. Would you mind stating how much you paid out ? A. I 
paid out two million nine hundred and fifty odd thousand dollars. 

By Mr. Mayer: 

Q. How, has the capital of the Phenix Insurance Company 
been increased ? A. It has since; yes, sir. 

Q. To what extent ? A.. It has been increased from a million 
dollars to a million and a half dollars, and the increased capital 
was sold at a premium, which added to the surplus of the com¬ 
pany one million dollars besides the capital of $500,000. 


Testimony of Mr. Sheldon. 


6G5 


Q. Do you remember the date of the increase? A. The pro¬ 
ceedings whereby the capital was increased were initiated way 
back in June, and the payments were called up so that the last 
payment should be made in December before the end of the year. 

Q. Was there anything in relation to the situation of your 
company as it existed upon the day that we referred to — this 
newspaper clipping — that was not either inquired about, or that 
* you did not inform Mr. Hunter about? A. No, sir; I gave him a 
very full detailed statement. I called his attention to the fact 
of the undervaluation of my securities, so that my surplus was 
really very much larger than it appeared to be. 

Q. In dealing with the Insurance Department, state whether 
they declined to allow you certain credits on some reinsurance ac- 
counts ? A. Yes, sir. The Superintendent would scrutinize all 
the asset side of the accounts, and was very strict about the last 
statement. I had occasion, for example, to claim one asset of re¬ 
insurance in a Chicago company where I had a liability to that 
Chicago company, where we had reinsured them, and the Depart¬ 
ment called my attention to that as well as to one Baltimore com¬ 
pany, I think. The Baltimore company, I think, was left out 
altogether, the Chicago company, I had charged myself in that 
company with a larger amount than I claimed to be due from 
them, and they allowed it at a reduced amount; instead of 100 
cents on the dollar, I think they allowed me about 50. 

By Senator Baines: 

Q. In other words, they held that the assets of the Chicago 
company would not be sufficient to pay you a hundred cents ? A. 
That is it exactly. 

By Mr. Mayer: 

Q. In other words, they took the contrary view from that 

which you desired ? A. That is it. 

Q. It occurred to me to ask you this question. You have stated 
the situation in regard to the Baltimore, Chicago and Boston 
fires and have stated that a large number of companies were wiped 
out of existence. Is it a fair statement to say that the present 
successful outcome is in a considerable measure due to the policy 
of the Insurance Department of this State ? A. I have no doubt 
of it at all. They could not have got the increased capital if a 
different policy had been pursued. 



666 


Senate Judiciary Committee. 


i * 


Q. Now, if a policy of constant publicity and publication of the 
details of the companies and the situation they were in had been 
pursued, what, so far as you can say, would have been the natural 
result of such a course ? A. It would have blocked the number 
of our domestic companies from getting the increase required. 

Q. Do you think it would have entailed grave results? A. I 
think it would. It would have disturbed values immensely and 
would have caused what we call an insurance panic. 

Q. Now, just one final question, which, although included in 
the document, I should like to put to you on the stand. Will you 
be good enough to say to the Committee in your own way, what 
your judgment is as one familiar with the situation and with 
fire insurance matters and with the status of affairs following 
the San Francisco conflagration — what is your opinion as to the 
manner in which the fire insurance situation was dealt with by the 
Department of Insurance with Mr. Otto Kelsey as Superintend¬ 
ent? A. My personal judgment is that it was handled not only 
with great ability, but with great tact and discretion, and, also, 
it was handled in such a way that it gave the cue practically to 
the other departments all through the country. 

Mr. Mayer.— I desire to state, that if the Committee wish, we 
can have this document acknowledged and verified. The reason 
that such was not done was entirely due to a family bereavement 
on my part which prevented me from taking the time. 

The Chairman.— I do not believe, gentlemen, that there is any 
occasion for it. 

Mr. Mayer.— Is this the statement, Mr. Kelsey, as of December 
31st? 

Mr. Kelsey.— Yes. 

Mr. Mayer.— At this juncture I would like to introduce in 
evidence a paper, being a summary of the insurance companies 
referred to in these documents and containing an account of the 
assets, capital and surplus to policy-holders. The companies sign¬ 
ing these documents show a total assets of $137,235,614, a total 
capital of $13,844,000; and in that connection I call the atten¬ 
tion of the Committee to the fact that the total capital, as mat¬ 
ter of fact, was very much greater, but in this total capital is 
included the capital of the United States branches of fire insur¬ 
ance companies, which is not, maybe, a minimum amount in 
accordance with, the law. The total surplus to policy-holders is 
$50,558,759. The entire total of resources of these companies 





Testimony of Mr. Beddall. 


667 


who have thus signed this document aggregates upward of $200,- 
000,000. I desire to say to the Committee that there would have 
been no difficulty in having had many more signatures if we had 
had more time. 

Edward E. Beddall, called as a witness, being duly sworn, 
testified as follows: 

By Mr. Mayer: 

Q. May I ask your full name ? A. Edward F. Beddall. 

Q. B-e-d-d-a-1-1 ? A. Yes, sir. 

Q. What is your business? A. Fire insurance. 

Q. What companies are you connected with, and in what 
capacity? A. I- am the United States general attorney for the 
Royal Insurance Company, of Liverpool, and also president of the 
Queen Insurance Company of Yew York. 

Q. The United States attorney for the foreign company and 
the president of the domestic company, the Queen ? A. Yes, sir. 

Q. May I ask you how many years you have been the United 
States attorney for the Royal ? A. Thirty-four years next Sep¬ 
tember. 

Q. And, of course, you are familiar with fire insurance mat¬ 
ters ? A. I claim to be so, yes. 

Q. Are you also familiar with the situation following the San 
Francisco fire? A. Yes, sir. 

Q. Do you know Mr. Vanderpoel? A. Yes, sir. 

Q. Have you known him for many years? A. Yes, sir. 

Q. Do you recall an occasion when Mr. Vanderpoel called upon 
you in regard to the San Francisco situation? A. Yes, sir. 

•Q. Do you remember how soon after the fire that was? A. I 
think it was about the end of May; about six weeks after, possibly 
a little sooner. The fire occurred on the 18th of April and this 
must have been somewhere about the 20th or 25th of May, 
possibly a little later; I don’t know the exact time. 

Q. Well, that is near enough ? A. Yes, sir. 

Q. How, may I ask you in your own way to tell the Committee 
the substance of the conversation had between Mr. Vanderpoel 
and yourself? A. You will understand, Mr. Counsellor, that 
inasmuch as this interview took place nearly a year ago that I can¬ 
not charge myself with a recollection of exactly what transpired 
there at that time, but I can give you an idea of the substance of 


G68 


Senate Judiciary Committee. 


it. Mr. Vanderpoel called at my office one afternoon and stated 
that his object in calling was to ascertain my views as to the in¬ 
surance situation generally, consequent upon the heavy losses- 

Q. Mr. Beddall, will you raise your voice just a little? A. If 
you will allow me to stand up I can make myself heard a little 
better. 

Q. Yes. A. (Continued)—Consequent upon several losses 
that recently occurred in the city of San Francisco. I told him 
that judging from the Superintendent’s report to the close of the 
year 1905, and from the statements of the losses sustained by the 
different insurance companies, that there was very little doubt that 
the surplus of at least one-half of the native companies had been 
exhausted and their capital impaired to a very considerable extent. 
I told him also that so far as the fire insurance companies were 
concerned that if the reports of the losses were sustained their en¬ 
tire surplus had undoubtedly been exhausted. I told him, how¬ 
ever, that in my judgment the plants of these various companies 
was of such value that if the companies were given time to re¬ 
plenish them — the native companies by making assessments upon 
their stockholders and the foreign companies by drawing funds 
from abroad — there would be no question that in due time they 
would be rendered solvent again under the law. He called my 
attention to the Insurance Laws, which provided that the Superin¬ 
tendent had a right to examine an insurance company at any time 
he pleased and also to require it to present a statement showing its 
condition. lie wanted to know what my opinion was as to the 
wisdom of exercising that right which the Superintendent had. 
I told him; I pointed out to him what he of course well under¬ 
stood, that it was impossible to make an examination of the 150 
companies that were reporting to this Department, that it would 
take a year or two at least to do it, but that-so far as the render¬ 
ing of the statement was concerned, I could not see that any good 
purpose would be accomplished by it, seeing that there was no 
company at that time in a position where it could make a sworn 
statement and show precisely what its position was, or, if such a 
statement were rendered, then it would be only a matter of esti¬ 
mate, and would not convey any more information to the people 
generally than they knew through the newspapers — a little more, 
perhaps, but not very much. I said further, that if those state¬ 
ments were called for and should disclose a condition, which we 
supposed that they might with a certain number of the companies, 




Testimony of Mr. Beddall. 


GG9 


that it would lead probably to a large cancellation of the policies 
of those companies that were shown to be the weakest, and inas¬ 
much as iU would weaken the coiiiideuce of the public in them that 
the effort to secure new capital would be frustrated; that the only 
way for a company to get new capital was to have the old company 
in a sound and solid condition so far as the estimate of the public 
was concerned, and that if these companies were discredited at any 
time then the effort to raise new capital would not succeed, and 
I also told him with regard to the foreign insurance companies, 
that there was no foreign insurance company which had a regu¬ 
larly organized branch in the United States but what would supply 
additional capital, but that if the integrity of that company were 
assailed and a cancellation of its business took place, why then the 
home office of the company abroad would not send the money to 
replace the losses here, which they would do if the company were 
in a sound condition. This was the general tendency of the advice 
that I gavd him. I told him also that if he should get these state¬ 
ments and if it should lead to the suspension of payment by the 
companies that the public would gain nothing by it, because it 
would be much easier to raise additional capital by assessment 
upon additional concerns than it would be to raise new capital on 
old ones. That seemed to meet with his assent, that having the 
organization and making an assessment that an assessment could 
be collected much easier than you could organize a company and 
collect it in that way. 

Then we took up another phase of the question, which was this. 
I pointed out to him that there was in the city of New York and 
in all of the cities of the United States vast amounts of merchan¬ 
dise upon which loans had been made by the banks. This mer¬ 
chandise was insured in these very companies and the policies w r ere 
held as collateral security for the advance that had been made; 
that if by getting a statement from the Insurance Department, 
giving the facts and showing that so many of these companies were 
temporarily impaired, that would frighten the banks, the loans 
would be called in, and inasmuch as the companies that wer,e 
actually solvent could not take this business — mind you, they 
were all full — that the result would be a commercial as well 
as an insurance panic, and I therefore asked him, urged him with 
all the force that I could, to give the companies time in order to 
enable them to put their houses in order. Now, I could do that 
with perfect fairness because it so happened that the companies — 


670 


Senate Judiciary Committee. 


both of them — that I represented were in a solvent condition, at 
the time that I spoke to him; therefore there was no necessity 
for my advising him in the interest of my companies but it \\ as 
in the general interest of the public at large that the advice was 
given. 

Q. Now, may I ask what were the losses paid by your company 
in San Francisco? A. The losses paid by the Royal Insurance 
Company — I put them down; I have a memorandum if I may 
look at it. 

Q. Yes. A. The gross amount paid was $6,746,801; the net 
amount was $4,595,176.25. With the Queen Insurance Com¬ 
pany, I have not got the amount here, but it was about $1,550,000 
net. 

Q. Is the difference between the gross and the net amounts 
represented by reinsurance? A. Not entirely, sir. It is repre¬ 
sented by reinsurance and salvage. 

Q. After all these months have passed, with your familiarity 
with the situation, what is your opinion in regard to the wisdom 
of the course pursued by the Insurance Department? A. In¬ 
asmuch as the Insurance Department acted practically in accord¬ 
ance with what I had suggested I can only say that it was a wise 
course to take. 

Q. Do you occupy any position — that is, is there any organ¬ 
ization of companies in which you are an officer of any kind ? 
A. No, sir. 

Q. I do not want to ask a question which is embarrassing at 
all, but is it not a fact that through your long experience you are 
frequently advised with by fire insurance officers ? A. I think 
I may answer yes to that. Yes, sir. 

Q. Now, have you had any experience with the Insurance De¬ 
partment in which your company has been denied credit for re¬ 
insuring, which you thought ought to have been given ? A. Yes, 
sir; one case in particular. That was the Chicago company to 
which Mr. Sheldon alluded. The Committee is aware that there 
is a practice of reinsurance between companies. We found that 
we owed the Traders — that is the name of the company, the 
Traders of Chicago, after the Chicago fire; assuming that all the 
policies were total losses we owed them $42,000, and the Traders 
owed the Royal in return, $31,000. Therefore there was a bal¬ 
ance of $11,000 which the Royal owed to the Traders. The 
Traders being in the hands of a receiver the adjustment of those 






Testimony of Mr. Beddall. 


671 


losses had not proceeded quite as rapidly as it had with those 
companies that could handle their own affairs, and up to the 
present day those losses with the Traders have not been adjusted. 
So when the 31st of December arrived we took credit in our assets 
for $31,000, which were due to us by the Traders and we charged 
ourselves with the $12,000 in our liabilities which were due by 
us to the Traders. The Insurance Department insisted that we 
should charge ourselves with a liability, but would not allow us to 
take credit for anything from this company, that company being 
in the hands of a receiver. We protested against it. We wrote 
and told them that it was recognized by the courts of all the States 
of the United States, as far as we knew, that in an account of this 
character we had a right to set it off. The receiver for the Traders 
did not dispute it at all. We claim that inasmuch as we have 
the money in our own hands there was no doubt about our ability 
to collect it. No payment would of course have been made until 
the account was finally adjusted, when a check for the balance 
would be drawn. We had quite considerable correspondence with 
the Insurance Department but they were obdurate and would not 
permit us to take it. That did not cut any great figure in our 
statement, but that was the position they took, and wrongly I 
think; wrong, as I say now, because if we had had the disposition, 
and the law would compel them I think, we could have made our 
contention prevail. Still, that was the position that they took. 

Q. Just, I think, this final question. You have known Mr. 
Yanderpoel for many years ? A. Yes, sir. 

Q. Did you have confidence in him so far as your relations had 
developed? A. Nothing had ever transpired which would prevent 
me from having confidence in him. 

Q. Would you have felt at liberty to express yourself in regard 
to the matters that you have testified to in that conversation if 
some strange person had come to see you ? A. I think not, I think 
I would not have spoken as candidly and freely as I had to a 
stranger, no. 

Q. When you thus spoke to Mr. Yanderpoel did you feel that 
your confidence and your views would be respected so far as you 
desired ? A. I think so, I thought so; I thought that he would 
give such weight to them as was due to one with the experience 
that I had had. I told him honestly from my heart what I be¬ 
lieved was best to be done, but he did not give me to understand 
as to whether he would carry it out or not, though he went into the 
whole subject very thoroughly. 


Senate Judiciary Committee. 


672 

I wish you to understand, Mr. Counsellor, that I am here 
to-day under compulsion, that I am not a voluntary witness here. 
I come at some inconvenience, but having received the mandate 
of this Committee I of course came. 

Q. Mr. Beddall, you were subpoenaed by me ? A. 1 es, sir. 

Mr. Hatch.— That was the reason, Mr. Beddall, why we asked 
the Committee to issue the subpoena, so that we could get you 
here. We knew that you would not come voluntarily. 

Q. I served the subpoena on you, did I not? I served the 
subpoena? A. Yes, sir. 

Q. You and I had never met until that occasion? A. Ho, sir. 

Q. Have you any personal acquaintance with Mr. Kelsey ? 
A. Ho, sir; never met him until this morning. 

Q. Have you any personal interest in Mr. Kelsey ? A. Ho, 
sir, nothing at all. 

Q. May I be permitted to ask you this question ? Did you not 
say to me, when I told you I was to subpoena you, that you would 
prefer not to come, but if I subpoenaed you you would come as a 
duty and tell the truth ? A. Yes, sir. 

Q. Mr. Shallcross signed this document ? Mr. Shallcross signed 
the paper that I read here? A. Yes, sir. 

Q. What position has he in the company ? A. He is the 
manager of the Hew York City Department, as we call it. 

Q. Of the Koyal ? A. Of the Royal. 

Q. Are you familiar with the contents of that paper? A. I 
have glanced over them, that is all. I might have read them. 
I know of them. 

Q. May I ask you how much money was transmitted by the 
Royal Insurance Company from abroad ? A. Yes, sir. About 
two weeks after the happening of the fire, as soon as we got any 
accurate information, or any at all reliable information, concern¬ 
ing the losses, they cabled me over two millions and a half of dol¬ 
lars. They immediately afterwards transferred about $400,000 of 
other United States assets which were held in this country, but 
which had not been turned over to the branch. During the year 
1906 the net amount remitted from the other side was $4,106,- 
196.82. 

Q. So that at no time were you concerned about the condition 
of the company of which you are the American attorney? A. 
Ho, sir, but there was about a week or two when the branch was 
technically impaired. 

Mr. Mayer.— I offer this paper in evidence. 


673 


Testimony op Mb. Sheldon. 

Summary of condition of fire insurance companies signing docu¬ 
ment descriptive of fire insurance situation following San Fran¬ 
cisco fire, and results of policy pursued by New York Insurance 
Department: 


Paper marked Exhibit 

159, and is as 

follows: 


New York Fire 



Surplus to 
Policy-holders. 

Companies. 

Assets. 

Capital. 

Williamsburg City Fire 

$2,342,872 

$250, 000 

$1,014,094 

United States Fire. . . 

527,451 

250,000 

284, 000 

Peter Cooper Fire.... 

422,043 

150,000 

194,395 

Home . 

20, 839, 174 

3, 000, 000 

10,408,355 

Niagara Fire . ... 

4,463,203 

750,000 

1, 770, 208 

North River. 

1,837,513 

350,000 

574, 524 

Empire City Fire. 

571,372 

200,000 

311,154 

Globe & Rutgers Fire.. 

4,097,283 

400, 000 

1, 653,853 

Stuyvesant. 

539, 876 

200, 000 

267,945 

German-American .... 

13,798,730 

1,500, 000 

• 6, 630, 426 

Plienix. 

9,501,321 

1, 500,000 

3, 126, 824 

Eagle Fire . 

1,366,518 

300,000 

777,620 

Pacific Fire . 

637, 725 

200, 000 

389,681 

Germania Fire. 

5,178,071 

1. 000,000 

2,094,933 

Westchester Fire . 

3,738,676 

300, 000 

1, 311,275 

Hanover Fire. 

4,228,427 

1, 000,000 

1,892,290 

Foreign Fire Insurance Companies, United States Branches: 


Commercial Union Assurance. 

$7,179,301 

*$200, 000 

$1,613,066 

Palatine. 

3,248,580 

210,000 

1, 106, 243 

Caledonian. 

2,155,909 

210,000 

527,225 

Norwich Union Fire. 

3,172,591 

200, 000 

931,093 

Phoenix Assurance. 

3,229,890 

210, 000 

942,225 

Northern Assurance. 

4,248,912 

200,000 

1, 183, 907 

London Assurance. 

2,441,320 

205, 000 

650,600 

Royal. 

12, 903, 822 

235, 000 

2,130,046 

Liverpool & London & Globe. . 

12,335,961 

200, 000 

4,623, 651 

North British & Mercantile... 

6,712,617 

220, 000 

2, 687, 485 

Atlas Assurance. 

1,959,636 

204, 000 

633,181 

Totals. 

George P'. Sheldon, r< 

By Mr. Mayer: 

Q. Will you tell the Co 
in this country compares t 

$137,235,614 

$13,344, 000 

$50,558,759 

ecalled, further testified as follows: 

mmittee how the fire insurance capital 
it the present time with the insurance 


* Deposit capital. 

22 






































6^4 Senate Judiciary Committee. 

capital years ago? A. In arranging for an increase of capital 
and in order to induce investors to take some new stock winch I 
was going to offer, I looked up the condition of the capital of 
companies doing business in the State of New York, to which 
State a larger amount is reported than any other State. I found 
that following the San Francisco conflagration, the wealth or 
property of the country 'during the past twenty-five years had 
increased about 185 to 190 per cent., and the capital and surplus 
of the companies reporting to New York State, following the San 
Francisco conflagration, had decreased, compared to twenty-five 
years ago, in New York State 33J per cent.; so that there was, 
as I thought, a fine field for new capital to come into the under¬ 
writing business, by reason of the enormous increase in values and 
diminution in the amount of insurance capital then reported. 

Q. Did that situation — those conditions which you have just 
referred to — make any impression on your mind as to the neces¬ 
sity for conservative action ? A. Why, it made it almost — it 
could not be avoided, because it is well known for years past that 
we have not enough insurance capital in the State of New York 
to do the business, anyway; but with that large amount taken out 
by the San Francisco conflagration, there was an enormous short¬ 
age of insurance. 

Q. May I ask you whether, without mentioning names, some 
fire insurance people were of a different view than that which you 
have expressed, if you know; that is to say, whether some believed 
that quick and drastic action should be taken? A. I do not, not 
in the interests of the community. 

Q. But were there some? A. Well, I have understood that 
there may have been some, possibly, from selfish considerations 
with reference to their own interests, who would not have objected 
possibly to having seen some drastic action taken. 

Q. Have you ever heard that the Governor — Governor Hig¬ 
gins was communicated with by a Mr. Charles A. Moore, by the 
Board of Transportation and Trade, and by the Merchants’ Asso¬ 
ciation, urging quick and drastic action? A. Yes, sir, I knew 
that at the time. Mr. Moore is a neighbor of mine up the country. 

Q. Charles A. ? A. Charles A., yes sir. 

Q. Did that course meet with your approval as a matter of 
public policy? A. No, sir. 

Q. Are you familiar with the replies of the Superintendent? 
A. Oh, yes, sir; T saw them. They were published at the time 
in the Journal of Commerce. 




Testimony of Mr. ITare. 


675 


Q. They were? A. Yes, sir; especially the one I know to the 
Board of Trade and Transportation; I remember that particu¬ 
larly. 

Q. May I ask your opinion from your point of view as to the 
sound judgment and sense of the reply of the Superintendent? 
A. I think it received the indorsement and approval of'everyone 
familiar with our business, and we were very glad indeed to have 
the situation appreciated as it was. 

Q. And I assume the whole business community that was doing 
business there? A. Oh, yes, sir. 

Q. How, that brought out a fact which we were not acquainted 
with before; that is, that that reply was published in the Journal 
of Commerce? A. Yes, sir. 

Q. And is it your opinion that that reply had a valuable and 
steadying effect upon the situation ? A. It certainly did. 

Q. Did you regard it as an important document ? A. I did. 

Q. May I ask you — I do not want to tread on delicate 
ground — but may I ask whether Mr. Moore is a director of an 
insurance company? A. Yes, sir; two of them. 

Q. May I ask the names? A. The Continental and the Fi¬ 
delity Fire and Insurance Companies. 

Q. Was the Fidelity Company organized after the fire? A. 
Yes, sir. 

Q. Was it organized by many of those interested in the Conti¬ 
nental? A. Entirely, the stockholders. 

Q. The same stockholders ? A. Yes, sir. 

By Senator Page: 

Q. I think probably this one question should be asked. Do 
you think that Mr. Moore was actuated in writing that letter with 
a desire to benefit his own company at the expense of the other 
companies? A. Well, sir, I am frank to say I do not think Mr. 
Moore would have written that letter at all if he had not been 
asked to do so. 

Q. But as you and I know, Mr. Moore— A. Yes, sir. 

Q. Would you think that he intentionally would write a letter 
of that sort for the benefit of his own company and to put other 
companies out of business for his own benefit? A. Hot for his 
own benefit; no, sir. 

J. Montgomery Hare, called as a witness, being duly sworn, 
testified as follows: 


070 


Senate Judiciary Committee. 


\ 


By Mr. Mayer:- 

Q. Mr. Hare, wliat is your position, please? A. I am tlie 
United States manager of the Norwich Union Fire Office, of 
" England. 

Q. You reside where, please? A. I reside in Hew York. 

Q. And for how many years have you been such manager ? A. 
I have been the manager of that office for twenty-eight years. 

Q. And how many years have you been in the fire insurance 

business? A. Forty-eight years. 

Q. Have you any personal acquaintance with Mr. Kelsey ? A. 

I never met him until this morning. 

Q. And were you subpoenaed to come here? A. I was, at 

much inconvenience. 

Q. Had I the pleasure of meeting you before the occasion when 
I subpoenaed you ? A. ,1 never met you until then. 

Q. How, did you sign the paper which I read this morning, 
and which is in evidence as Exhibit Ho. 158 ? A. Well, if you 
will let me look at it. 

Q. Yes (handing paper to witness). A. Yes, that is my signa¬ 
ture. 

Q. Then this signature on the paper Exhibit 158 is yours? 
A. It is. 

Q. Did you read this paper through ? A. I did. 

Q. As you are now under oath, will you state whether the con¬ 
tents of that paper are true, so far as you know ? A. Everything 
that is stated there I believed to he true before I signed it. 

Q. And does that paper represent your views ? A. It does. 

Q. How, will you be good enough to state in your own lan¬ 
guage, even though it may cover some of the ground referred to 
by Mr. Sheldon and Mr. Beddall, the San Francisco situation as 
it appeared to you; that is, the situation following the tire, having 
regard to the question of the ascertainment of losses and salvage, 
and the critical character of the situation ? A. It was very critical, 
because most of our offices in San Francisco were destroyed. Many 
of them had their papers destroyed, and those that had them in 
vaults were afraid to open them, because they were afraid with 
the coming in of fresh air, that combustion would begin again, 
and the result was that many of us could not ascertain for a long 
while — weeks — the amount that we had in the district. Then, 
also, the system in California existed of reinsurance, what we call 
inter-reinsurance between the companies, and the question of the 





Testimony of Mr. Hare. 


G77 


solvency of our reinsurers had to be considered; and while the 
California — the Pacific Coast Department — is not under my 
supervision and the business is reported direct to England, so far 
as the laws of Aew York are concerned, I have to include their 
figures in my statement as the United States manager. I got 
letters from the Department in regard to it, and I told them the 
embarrassment under which we were suffering, and it is my opin¬ 
ion, just as sure as day follows night or night follows day rather, 
that if there had been any pressure put upon the companies there 
would have been a financial panic, because the conditions in each 
company differed more or less from the conditions in another com¬ 
pany. You take my company, for instance. It has an authorized 
capital of five and a half million dollars with a surplus of about 
five millions; but their head office is away from the centers in 
England — it is Norwich, England — and when these directors 
over there felt that they had, I think, two and a half million or 
two million eight hundred thousand dollars on deposit over in 
this country, it took me some time to explain to them that the law 
of the State required that there should be charged as a liability 
the unearned premium and that we must include in our estimate 
our San Francisco losses. The result was that in the first state¬ 
ment that we were required to make to the Department, we showed 
a technical impairment. Then when the last statement was sent, 
I had a little correspondence with the Department similar to that 
of Mr. Beddall. We had some seventy odd thousand dollars due 
us by a company which was authorized to do business in this State, 
and we owed them about sixty; and we thought we should be only 
charged with the difference, and we used as an argument the 
fact that that company was authorized to do business in this State. 
The Department said that their losses w T ere so heavy that they 
did not feel authorized to do it. We had some reinsurance in com¬ 
panies which we were satisfied were perfectly good, but the De¬ 
partment would not allow us to take credit for them, because they 
w r ere not authorized to do business in New York State. One was 
the New Zealand, of Australia, which was a very strong office, and 
since has paid us the full amount. 

Q. How large an amount, do you remember ? A. I should 
have to trust my memory for-that. 

Q. Well, just roughly? A. I should say, about $35,000; but 
the Department threw out of our statement about $50,000, and 
I had a great time explaining it to our head office. 





078 


Senate Judiciary Committee. 


I 


Q. Mr. Hare, do you recall what the San Francisco losses of 
your company were ? A. Yes, they were about a million five 
hundred thousand net. 

Q. And they have been paid ? A. They have not been all paid 
yet, no. 

Q. A considerable number ? A. Yes. 

Q. But the same are in process of adjustment? A. They are 
in process of adjustment, yes. 

Q. Hid the Norwich Union send over any fresh capital to this 
country ? A. They did. 

Q. How much, may I ask ? A. Well, we would not call it capi¬ 
tal ; they sent over funds here. 

Q. I mean funds. A. About a million of dollars. 

Q. Of course, I meant moneys*. A. Yes. 

Q. And that was to meet this situation ? A. That was to meet 
the situation, yes. 

Q. Ho you recall whether your company passed resolutions at 
its home office ? A. They did. 

Q. What, in substance, were those resolutions ? A. At that 
time, when everything was uncertain, it was not clearly defined 
in the minds of the directors whether they would use, or to how 
large an extent, any of their United States funds, and to satisfy 
the Hepartment we sent over to them a form of resolution to be 
passed by the Board, to the effect that the Norwich Union would 
hold itself responsible to keep up their funds in this country, so 
that the amount of capital, as it is called technically, should be 
kept intact; and that was verified before a United States consul 
and was sent on here and forwarded to the Hepartment. 

Q. When you say capital intact, you are referring to the capi¬ 
tal of the United States branch ? A. Yes, the foreign companies 
are compelled in their competition with the domestic companies to 
be placed on a little more than a parallel. The domestic companies 
must have a capital of $200,000, but it can be possibly a.little 
impaired — I think, if I remember, it is 20 per cent.; but the 
foreign companies must have the full $200,000 clean and unim¬ 
paired all the time. 

Q. Now, have all the losses in San Francisco, which have been 
adjusted and which have not involved any legal questions, been 
paid ? A. They have. 

Q. All of them ? A. Yes; we have paid over a million dollars 
so far. 

Q. Ho you know Mr. Vanderpoel? A. I do. 



Testimony of Mr. Hare. 


679 


Q. For how many years, perhaps? A. Oh, away back when 
President Koosevelt was governor. 

Q. Have you seen him frequently during this year ? A. I have. 
He has made several examinations of my company. 

Q. Is there anything that has occurred between you and him 
that has impaired your confidence in him? A. Nothing at all. 
I was always inclined to think that he was rather persevering in 
his examination. 

Q. So far as your company was concerned? A. Well, because 
he wanted to see our safe deposit vaults, and I had to take our 
trustees over there, and they were men of business —- they fretted 
a little over it. He wanted to look at every bond, which he did. 
Of course, he had a perfect right to. 

Q. Have you that same confidence in Mr. Vanderpoel, so far 
as you are concerned, in relation to the fire insurance business 
now ? A. I have, very strongly. 

Q. And as a concluding question, may I ask you what your 
opinion is as to the manner in which this situation was dealt with 
by the Department of Insurance of this State under Mr. Kelsey, 
that is, this San Francisco situation? A. I think the Department 
was stringent enough. I don’t know whether they might not have 
— I think there were three statements required, if I remember 
right, three statements required of us during the year from April 
18th to the end of the year. 

Q. That is correct ? A. It was very harassing to us because it 
was necessary to make our accounts up. 

Q. Well, then, I gather from your answer that you think that 
the Department kept in touch with the situation ? A. I do. 

Q. And do you regard the outcome of this whole situation as 
favorable to the fire insurance interests and to the commercial 
world ? A- You mean the result of the Department’s management ? 

Q. I beg your pardon ? A. You mean as a result of the Depart¬ 
ment’s management? 

Q. Yes, I mean the Department’s management and the action 
of the companies themselves. A. Well, it is the most extraordinary 
condition we have had. The San Francisco fire is the largest fire 
known to history, and the companies have paid up, so, as I was 
told this morning, that members of a commercial body in San 
Francisco had spoken of the action of the companies —• indeed, 
Mr. Whitney in his report speaks of the action of the companies. 
Now, if the Department had pressed the companies in mid-summer 
they could not have got the funds to have done as they have done. 



GSO 


Senate Judiciary Committee. 


Q. Now, just this question. In these reports that you made, did 
you convey to the Superintendent of Insurance the information of 
which you were possessed, which was called for by the items and 
headings in these reports ? A. I did. 

/ 

Harold Herrick, called as a witness, being duly sworn, testi¬ 
fied as follows: 

By Mr. Mayer: 

Q. You reside where? A. At Lawrence, Nassau county, New 
York.* 

Q. And do business where? A. In New York city, at 46 Cedar 
street. 

Q. And you are the president of what company? A. The 
Niagara Fire Insurance Company. 

Q. And how long have you been president of that company? 
A. About twelve years. 

Q. And how long have you been in the fire insurance business? 
A. Thirty-five years. 

Q. Your company is a domestic company, is it? A. It is, 
indeed. 

Q. Are you familiar with the situation following the San Fran¬ 
cisco fire? A. Most unpleasantly so. 

Q. What were the losses of your company in San Francisco ? 
A. Well, we have paid $2,100,000 now, and we have about 
$50,000 more to pay, which we cannot pay because it is reinsure 
ance of other companies who have not settled their losses. Our 
own individual losses are all settled and paid. 

Q. And they aggregated more than a million and a half? A. 
No, $2,100,000 we have already paid, and about $50,000 more 
to be paid vjhen the time comes. 

Q. Now, did your company increase its capital after the fire? 
A. We had to. 

Q. And to what extent? A. The stockholders contributed 
$250,000 to capital, and $750,000 to surplus account. 

Q. So that speaking-. A. In a general way the stockhold¬ 

ers were assessed 200 per cent, on their holdings; that is what it 
amounted to, because the stockholders took all of the new stock. 

Q. Amounting to? A. One million dollars even, paid into the 
company. 

Q. Do you know Mr. Yanderpoel? A, Yes. 



Testimony of Mr. Herrick. 68i 

Q. IIow long have you known him? A. Oh, fourteen or fifteen 
years. 

Q. bo far as your relations and observations have gone, did 
you have confidence in Mr. Vanderpoel? A. Entirely so. 

Q. Has he made examinations of your company? A. Three or 
four; two within six months. 

Q. "W ill you give the Committee, in a general way, an idea of 
those examinations, so far as their completeness was concerned? 
A. I he first examination — I think we had two prior to this year. 
The two this year were on account of the San Francisco disaster 
and the necessity of increasing the capital. I will come to that 
later. The former examinations were in the general routine busi¬ 
ness of the Department, and the examination was conducted at our 
expense in a most elaborate way, with a. large corps of clerks 
and in a most deliberate and painstaking manner. We thought it 
was entirely too searching, but nevertheless the Department had 
the right to do it, and they did it and examined everything to the 
most remote detail, giving close examinations not only to the finan¬ 
cial condition of the company, but to the possible question of over¬ 
issue of stock, and I am not sure that they did not count the post¬ 
age stamps; but, at all events, those were routine examinations. 
How, this past year they have made two examinations on account 
of our capital increase. We, like all other companies, were placed 
in the extreme position on the 18th of April of not knowing 
whether we were alive or dead. We could not tell. Our records 
were all in San Francisco, and they were burned. We did not 
have any duplicates of them in Hew York. We did not know 
where our manager was; his home was burned out. Our losses 
might have been anywhere from one million dollars to two or three 
or four million. We did not know; we could not tell. Gradually 
we gathered a little out of the chaos, and as soon as we realized 
how bad it was we knew we had to raise more money. In the 
meantime the Department officials were after us, looking after 
our condition, and we promptly told them the whole story. 

Q. Does that include Mr. Vanderpoel? A. That includes Mr. 
Vanderpoel, whom we consulted very frequently, not only I, but 
the chairman of our Finance Committee, Mr. Robert W. De For¬ 
est. Mr. De Forest made several trips — I think several trips, 
but at least one — to Albany to consult Mr. Kelsey. 

Q. Did you have an occasion to see Mr. Hunter during this 



G82 


Senate Judiciary Committee. 

time? A.^ Yes, Mr. De Forest and I Mr. Hunter several 
times in the Department’s office in the Washington building in 
Hew York. 

Q. And all of those interviews related to the condition of jour 
company ? A. Absolutely, except when asking questions about 
what we knew about other companies; but primarily it was to ex¬ 
amine the condition of the Niagara, and the first examination 
was to show to the satisfaction of the Department that we were 
not insolvent when we made the call on our stockholders for more 
money; and the second examination was to prove that we actually 
received that money from our stockholders when we said we had 
it; that is, they examined the records, the subscriptions of stock — 
examined them, alb papers signed by the stockholders taking the 
stock, and saw the securities and the money therefor before they 
would permit the issue of the new stock. 

Q. How, you have said that you gave Messrs. Hunter and 
Vanderpoel information concerning other companies? A. I 
should not have said [Messrs. Hunter and Yanderpoel but Mr. 
A 7 anderpoel, frequently. , He was in the insurance district seek¬ 
ing information each day. I frequently met him on the street 
and would stop and chat, and he was in our own office almost 
every day, and would speak of certain companies — what I 
knew about them. I don’t know that I gave him any informa¬ 
tion of any particular importance, but all I had I gave him very 
willingly. Having made a free breast of my own difficulties, I 
was at liberty to talk about other people. 

Q. That information as to other compaines was how ascertained 
by you ? A. Simply from my general knowledge of the insurance 
business; my intimacy with most everybody in it, and from 
the knowledge that one man has of the business which his com¬ 
petitor is doing; general businesss knowledge. 

Q. Did you also include in asserting as to the condition of 
other companies in regard fto salvage based upon your own 
knowledge, your information as to your own salvage? A. Yes, 
I think so. The extent of the salvage was wholly estimated in 
everybody’s mind. We were only estimating it; we could not 
know definitely, and as a matter of fact the salvage turned out to 
be much less than we anticipated. A\ r e are now speaking of the 
period in May and June, I assume? 

Q. Yes. A. The companies were looking for a very substan¬ 
tial and considerable salvage, which did not materialize. 



1 ESTIMONY OF Me. ITeEEICK. 


683 


Q. And is the same observation to be made in regard to re- 
insuiance matters; that is, did you have or seek to get informa¬ 
tion as to the value of reinsurance? A. \es. We were very 
much disturbed about that (question at that time, as every com¬ 
pany was. W e did not know whether our reinsurers were good, 
but as a matter of fact they all turned out to be good. 

Q. Did you possess Mr. \ anderpoel freely and frankly of any 
ml urination for w hich he asked you as to your company or any 
other company? A. Ahvavs. 

Q. Did you believe that that information would be properly 
treated and handled by Mr. \ anderpoel? A. If I had not known 
that it would be, I should not have given it to him, that is, in 
regard to other companies. With respect to our own company, 
he was entitled to anything that he asked for. 

Q. Had some strange person come to you asking about other 
companies, would you have felt at liberty to inform them? A. I 
should not have informed them. 

Q. A on wmuld not have informed anyone other than some person 
in whom you had confidence? A. Yo. 

Q. And was Mr. Vanderpoel such a person? A. Decidedly. 

Q. Yow, I show you a paper in evidence, Exhibit 157, and ask 
you if that is your signature (handing paper to witness)? A. 
It is. 

Q. Did you read that paper before you signed it? A. Yes, sir. 

Q. And are the statements therein true? A. Entirely so. 

Q. And are you now of the opinions set forth in that paper? 
A. Yes; and I would like to sav this that has not been touched 
upon. It occurs to me as a very important thing in the matter. 
We w^ere all in a terrible state of mind in the insurance business 
last summer, as you all know, and our particular fear was of the 
Insurance Departments — not fear of our ow T n Department here 
in Yew York; in that we had confidence. Yot fear of the Massa¬ 
chusetts or Connecticut Departments, but way out west where in 
many states they did not have Insurance Commissioners, where 
the Secretary of State or somebody else is also the Insurance Com¬ 
missioner, and wav down in Florida and out in Oklahoma. Those 
good people, with all due respect to their intentions, do not — did 
not know about the insurance business, the conditions in the busi¬ 
ness, as we did in the East. They wmre sending and writing most 
extraordinary letters and telegrams to me and to other companies 
for an immediate statement of our exact financial condition; and 




684 


Senate Judiciary Committee. 


we didn’t know what it was, and it was utterly impossible to give 
it. Those gentlemen-all perhaps meant well; they felt that they 
ought to do something to satisfy their constituents, but some of 
them didn’t know what to do, and their eyes were on Massachusetts 
and Yew York, and as soon as the policy of those States was deter¬ 
mined— this is my opinion simply; it is not history — those 
other States all fell into line, and had our Department here taken 
any radical position, you know, such as some of those newer men 
away from Yew York were inclined to take of their own volition, 
we would have had an awful time here that would not have 
stopped with the insurance business. 

Q. Yow, it is a fair statement that if any other course had 
been pursued than that pursued by Mr. Kelsey in his Department, 
that it would have undoubtedly led to grave financial disaster ? 
A. There is no question about it. 

Q. And would it have affected other interests besides fire in¬ 
surance ? A. Of course it would. 

Q. So that it is true that a great deal of the commercial credit 
of the country and the world depends on the fire insurance busi¬ 
ness stability ? A. Why, that is a proposition which everybody 
knows. The foundation of the whole fabric of business is insur¬ 
ance. You could a great deal better get along without railroads 
or banks than you could without insurance. You could not build 
a house without insurance. You could not buy a bill of goods 
without insurance unless you paid cash for it. It is the founda¬ 
tion of credit in This country. That is not always understood 
when they are passing laws, but it is a fact. 

Q. Yow, did you have any discussions with the Department as 
to the credits that should be allowed you on reinsurance? A. Yo, 
sir, I didn’t want to have them. I took them out. I knew they 
would not admit them, so I failed to put them in. 

Q. So, in your case, that discussion did not arise? A. Yo, I 
knew that they would not admit it. I was entitled to it, but I 
knew they would not .admit it. It was a comparatively small 
amount, however, only ten or fifteen thousand dollars, or some¬ 
thing of that sort. 

Q. You were subpoenaed to come here? A. I was/indeed. I 
would not have been here without it. 

Q. Did I know you before the occasion when I handed you the , 
subpoena ? A-. I don’t know; I didn’t know you, 

Q. Do I state the fact correctly when I say that you said you 



Iestjmony of Me. Herrick. 


G85 


did not want to come here, and you only would corn© because of 
the subpoena ? A. I distinctly would not have come if I had not 
been- subpoenaed. 

Q. And you told me that, did you not? A. I think I did; it is 
true, nevertheless. 

Q. T asked Mr. Sheldon — rather, I should say, Mr. Sheldon 
called to the attention of the Committee the fact that the answer 
of the Superintendent of Insurance to one of the business associa¬ 
tions which was pressing for speedy and drastic action was pub¬ 
lished in the Journal of Commerce. Did you see that? A. Well, 
I am in doubt about that. I was away in San Francisco. As 
soon as I got the money in from my company, which I got in by 
the 25th of June, I went immediately to San Francisco to 
straighten out matters, and I was there all summer; and I didn’t 
see the Journal of Commerce for some time, and I am in doubt 
if I saw that. I knew it was published, however, but I doubt that 
I saw it myself. 

Q. Do you believe that the publication of that letter of the 
Superintendent, defining his policy, had a steadying effect upon 
the community? A. Oh, I do. 

Q. Do you think it had a highly valuable effect? A. Yes, and 
I think it was needed. 

Q. Without asking any names, may I ask whether, generally 
speaking, the responsible officials of the fire insurance companies 
are all of the same opinion as you as to the wisdom of the course 
pursued by Mr. Kelsey through his Department ? A. I think 
that the opinion is so unanimous that the exceptions are not 
worth considering. / 

Q. And you have talked, I assume, upon that subject with very 
many of the officials of the fire companies, both domestic and 
foreign ? A. Yes. 

Mr. Hatch.— That is the case of the Superintendent. 

The Chairman.— Well, Judge, do you wish to address the Com¬ 
mittee further ? 

Mr. Hatch.— Yes, I desire to call attention to this testimony 
that has been given. 

The Chairman.— And when do you desire to make that 
presentation ? 

Mr. Hatch.— At any hour that the Committee will fix. 

The Chairman.— Well, do you wish to proceed now? 

Mr. Hatch.— Ho, I think that I should prefer a short adjourn¬ 
ment to- 










Senate J udioiaby Committee. 


GSG 

The Chairman.— To what hour? 
Mr. Hatch.— Three o’clock. 

Becess taken until 3 o’clock p. m. 


Afteenoon Session, 3 p.,m. 

April 12, 1907. 

The Chairman- called the Committee to order at 3 :15 p. m. 

Summing 'Up. 

Mr. Hatch.— Mr. Chairman and Gentlemen of the Judiciary 
Committee: I could have wished in the presentation of this case 
to the Committee, in view of its importance to the Superintendent, 
and in view not alone of its importance to the Superintendent, 
but of its importance to the people of this State, that I could have 
had the opportunity to carefully examine this record in order that 
what remarks I have to make might be condensed as much as pos¬ 
sible, and also in order that I might more certainly call the atten¬ 
tion of the Committee to those features of the evidence which to 
my mind are the most salient and most important in enabling the 
Committee to reach a proper determination upon the merits of 
the case. 

By reason of other professional engagements I have been denied 
the opportunity of reading the testimony which has been taken 
heretofore, or to formulate my views in the form which I could 
desire to have them considered by the Committee. Therefore, 
it is that the presentation must be more or less a desultory dis¬ 
cussion of the testimonv which has been adduced. 

e/ 

I rely, however, upon the fact that the overwhelming character 
of the proof in this case is so strong of itself that no fair-minded 
man can have heard it and read it as it is entitled to be read, and 
not be convinced but that the Superintendent of Insurance of this 
State has discharged his duties to the letter and fulfilled every 
requirement of the law. 

It is the strength of the case that we rely upon rather than any 
discussion by counsel to make it stronger. 

I think it proper first to consider in this connection the law 
governing this situation. By the provisions of section 22 of the 




Closing Address of Me. Hatch Before Committee 1 , 687 

Public Officers Law the officers appointed by and with the advice 
and consent of the Senate hold tenure to their office subject to 
removal by the joint action of both the Governor and the Senate. 
The Governor is the initiative, and the Senate is the body that 
passes on the evidence and determines whether any charge brought 
against the officer is sustained, and whether the weight of evidence 
justifies the recommendation by the Executive. 

This rule is applicable to the State officers elected by the people. 
lhe\ aie removable for cause, by the Senate and the Governor; 
but the vote required in the removal of such an officer is a two- 
thirds vote of the Senate, and the officer shall not be removed 
save after such a vote. 

With respect to those officers appointed by and with the advice 
and consent of the Senate, they are removable by the Senate, and 
I take that to mean that the proper interpretation of the statute, 
indeetl the only permissible interpretation under its language, is 
that it must be by the entire body of the Senate, a majority of 
whom, alone, can remove the officer, and falling short of a 
majority of all the Senators elected, then no lesser number is 
competent to remove the officer. ETot only is this the fair and 
necessary interpretation of the statute, but it has been so inter¬ 
preted by the Senate in two cases, attention to which has been 
heretofore called. In the Ellis case, where the removal was of 
the Superintendent of Banks, the conclusion was reached, inter¬ 
preting this statute, that it required a majority vote of all the 
Senators elected to remove. Having established the precedent, 
it was followed the next year in the Smyth case, where there 
was a specific, distinct announcement by the Senate that this was 
the vote necessary to be obtained in order to remove such officer. 
So that the Senate will approach a consideration of this case upon 
settled law wdiich requires before a judgment of removal can be 
pronounced a vote of the majority of all the Senators elected. 

The public policy of this State under its statutes has not de¬ 
termined that the tenure of office of the Superintendent of Insur¬ 
ance shall rest upon the will of one man. It has determined that 
the tenure of that office shall be a fixed tenure for three years, 
which shall not be disturbed save by the action of the Governor 
and of the Senate; and never before has the power been attempted 
to be invoked save the proceedings against the officer were based 
upon some affirmative dereliction of duty involving corruption 
or malfeasance in office. 


688 Senate Judiciary Committee. 

The policy of the State as expressed in the former law, and 
reiterated again in 1906, when the tenure was again fixed for 
three years, was that the officer should hold his position for three 
years, and under the public policy of the State as expressed in its 
history since almost the first beginning, it has never been thought 
that a man could be removed from office where he was holding an 
office of fixed tenure, unless he was guilty of some malfeasance in 
office which called for his removal. 

However much it may have become the modern idea that it is 
essential to good government in this State that the power of re¬ 
moval should now be vested in a single individual, not only as to 
all the officers in the State that are appointed, whether by or with 
the advice and consent of the Senate, or otherwise, it is enough 
for us now to say that such policy has never been expressed with 
respect to the office of Superintendent of Insurance, and the last 
expression of the legislative will, as recently as 1906, and' after 
the insurance investigation is that the tenure should still remain 
at three years, subject only to change by the Governor upon his 
recommendation and upon the vote of the Senate. So that whether 
this policy be good or bad it is the law; and I assume that in this 
proceeding we will be governed by the law. 

I stated in opening this case to the Senate Committee on the 
day of its first meeting, that if we should be permitted to enter 
upon a hearing, which should develop the evidence in this case, 
that we would answer the matter contained in the Governor’s 
message — whether a charge or otherwise — that we would answer 
the whole of it, and prove to the satisfaction of any fair-minded 
man that the Governor when he penned his message making these 
charges was acting under a mistake of fact and was not well in¬ 
formed concerning the conditions affecting the office of the Super¬ 
intendent of Insurance in this State, and the business conducted 
by it. 

In oi dei that I may justify that statement it becomes necessary 
that we again look to some extent to see what the specific thing 
is which we were called upon here to meet, and upon which the 
Senate ^yas invited to exercise its power of removal. 

I first call the attention- of the Committee to the fact that in 
the message assigning reasons for the removal of the Superin¬ 
tendent of Insurance, there is not a word or a svllable which 
charges Mr. Kelsey or lays any accusation at his door, save so far 
as it relates to his failure in connection with the administration of 


Closing Address of Mr. Hatch Before Committee. 689 


law affecting the life insurance companies of this State. You will 
read the message in vain to find anything there concerning the 
subject of fire insurance, or concerning the subject of fraternal 
insurance, or concerning any other subject connected with the 
duties imposed upon this Department aside from the investigation 
conducted by the Armstrong Committee which developed the oc¬ 
casion for the law which was adopted in 1906. 

Yow think of it! After this testimony, how.small a part were 
those three companies, the Yew York Life, the Mutual Life and 
the Equitable, as compared with the whole volume of business and 
the other duties imposed upon the Superintendent of Insurance. 

I know the Governor of this State, and I know him to be an 
able lawyer, and I believe him to be an honest man, and that in the 
acts which he does as a public official, he believes those acts are 
necessary for the good government of the State. I do not impugn 
his integrity any more than did he impugn the integrity of Mr. 
Kelsey. But Governors like other men are not infallible; neither 
are they possessed of all the knowledge respecting the business ad¬ 
ministration of the great State of Yew York, simply because they 
are elected Governor. The mere change from private life to the 
gubernatorial office of the State, does not immediately furnish the 
occasion for the descent upon the incumbent of that office of all 
knowledge respecting the governmental affairs of the State of Yew 
York. lie remains a man to exercise his intelligence, judgment 
and discretion, and the process by which he shall learn, if he learns 
at all, is the slow laborious process by which knowledge is acquired; 
and if that process be not applied then there can be little accurate 
knowledge acquired. The Governor was mistaken, honestly no 
doubt, but still mistaken with respect to Mr. Kelsey’s administra¬ 
tion of the affairs of the office of the Superintendent of Insurance. 
The subject was called to his attention, because when Mr. Kelsey 
submitted himself to an examination, as he was bound to do under 
the law when called upon by the Governor so to do — although 
I submit that under the circumstances of that examination a man 
must have been so extraordinarily equipped as to tower above other 
men if he were able to give a fair and comprehensive view of the 
workings of his office and the subjects which had fallen under his 
administration and acted upon by him — but he did call attention 
to the fact that among the multitudinous duties that came upon 
him was the overwhelming calamity of the San Francisco fire; and 
T invite the Senators to read the examination on that subject taken 



090 


Senate Judiciary Committee. 


before tlie Governor, and there they will find that the only refer¬ 
ence that was made to it, or the only search for information con- * 
cerning it, was the issuing of the first circular by Superintendent 
Hendricks prior, as I recollect, to Mr. Kelsey’s accession to office. 
The whole matter stops there, and so little did it rest in the mind 
of the Governor, that when he came to draft his message and as¬ 
sign the reasons why the Senate should act in the removal of this 
man, there was not a line or word which called it to the attention 
of the Senators, or which showed that he relied upon it in making 
the recommendation of removal or that it in any manner influenced 
the Governor’s action. 

Governor Hughes would do violence to his logical and compre¬ 
hensive mind, not to have mentioned that subject if he had been 
informed concerning it. 

The Governor, as appears here by the testimony offered in your 
presence, so far as is disclosed, and we disclose the whole of it, did 
not accept the offer of Mr. Kelsey to be informed concerning his 
office and the administration of its affairs after he entered upon 
the duties of the. office. When he was tendered such information, 
although acknowledging the receipt of the tender he never followed 
it up, by asking for any information concerning the administration 
of the affairs, and neither oral word or document lias ever been 
communicated to him respecting that subject-matter save in the 
examination instituting this proceeding and the preliminary re¬ 
port of the Superintendent. I am fearful that what the Governor 
thought was that in the investigation of life insurance matters by 
the Armstrong Committee, he had acquired all of the knowledge 
upon the subject of the Insurance Department of the State of New 
York which it was necessary for him to know in order to act in¬ 
telligently concerning the vast business which is done through that 
office. 

And, so assuming, he directed his examination to that subject, 
thinking he needed no information from any other source to enable 
him to determine adequately the needs and requirements of the 
Department which he proposed to take into his possession in order 
that it might be administered bv another man. 

Upon no other reasonable theory can I account for the'fact that 
he makes no examination or mention of any other subject, save the 
subject of life insurance; and all of the other branches of the De¬ 
partment and of the duties of the Superintendent of Insurance 
m connection therewith pass, without a word of comment and 


Closing Address of Mr. Hatch Before Committee. 691 


scarcely of reference. So we come, gentlemen, here to act upon 
two things: First, to discover whether 'the Superintendent of 
Insurance in the discharge of his duty in connection with the law 
of 1906, known as the Armstrong Law, had been guilty of any 
dereliction, and failed to fulfill the requirements of the law or 
obey and heed its commands. Secondly, it becomes your duty 
to consider all of the obligations and duties that rest upon this 
man, as well as considering the proof of the way in which he 
has discharged those duties, tested, not by speculation, but by the 
actual result of the great things done in connection with them. 

The Governor considered half a case; you have the whole, and 
consequently you are in a position to reach a judgment which shall 
be more comprehensive and adequate than the Governor could pos¬ 
sibly render at the time when he penned his message. I there¬ 
fore call attention to the things contained in the message, so far as 
I am able to gather them, which we are called upon to meet. I 
should have been glad —• which in orderly course I think Mr. 
Kelsey was entitled to — to have had this message taken apart and 
its charges, if charges they be, formulated into specifications so 
that we might have known the particular thing that we are called 
upon to meet and to answer. 

But we have the whole message, and it is a message, part of 
argument, part of declamation, part of rhetoric, and part of charge, 
and therefore it is that I find some difficulty in digging out and 
putting my finger upon the specific thing which the Superintendent 
of Insurance is called upon to meet before the bar of this Com¬ 
mittee. 

The first statement, however, in the message is in this language: 
“ I recommend Mr. Kelsey’s removal because as head of this 
Department he has conspicuously failed to perform obvious duties 
of the first importance, and his neglect has demonstrated his 
unfitness for the trust confided in him.” This charge, the Com¬ 
mittee will observe, is couched in the most general terms. Koth- 
ing connected with it is specific, nothing from which we could 
tell what the particular neglect was. The Governor so under¬ 
stood it, because subsequently, with some degree of specification, 
some statements are made. But it is accompanied by an argument 
and statement which make it difficult to find out and specify just 
the language of the charge and the things that we are called upon 
to meet. As T construe it it rests in the failure upon the part of the 
Superintendent to remove the First Deputy, based upon the ground 


i 




G92 


Senate Judiciary Committee. 

u that he had failed to perform his duty in failing to discover 
and report frauds in the great life insurance companies of the 
Stated 7 That related to Mr. Hunter. There is 'nothing specific 
beyond the fact that it is stated that he occupied a position, and 
from the position which he occupied is deduced the inference that 
he should have known of the frauds and derelictions of duty by 
the insurance companies, and therefore have reported the same. 

The next is for failing to remove the chief examiner, Mr. Van- 
derpoel, who had made a false report of the character and manage¬ 
ment of these insurance companies and who was nevertheless con¬ 
tinued in office for a period of eight months. 

So we assume that the charge here against us is that we retained 
those two men in office after entering upon our incumbency, and 
that for failure to remove those two men we should be removed. 
The Governor comments upon that subject, “ The excuse given 
by the Superintendent that he had a large amount of work on hand 
and needed the services of these men, 77 is characterized as a barren 
excuse — and that his attitude in this respect — I quote the lan¬ 
guage — “ shows his entire failure to grasp his duties. 77 Of 
course, if he did grasp his duty, then that charge fails. 

Further, that he made no effort to determine the responsibility 
of other employees guilty of grave defects, although no such grave 
defects are specified. 

I invite any member of this Committee to point to a single word 
either in the message or in the evidence, which specifies in that 
connection wherein any employees other than Hunter and Vander- 
poel were guilty of grave defects, or who they are, or what were 
the circumstances under which they were appointed, or how they 
came to be there, or what they have done which is wrong. 

How can you meet any such thing as that? 

It is as intangible and impalpable as the wind. 

The next one; for failure to remove a clerk appointed at the 
instance of Andrew C. Fields. I assume that Andrew C. Fields 
was shown to be guilty of great dereliction of duty, according to 
some reports and charges, guilty of a criminal offense, engaged in 
corrupting or attempting to corrupt the Legislature. I have yet 
to learn that he has been removed from his position as a free 
man by being restrained of his liberty for a single hour, either in 
this State or elsewhere; and, if the facts were true, then some¬ 
body and somewhere in the criminal laws of this State, where 
the offense was committed, there is such a thing as a Grand Jury 




• Closing Address of Mr. Hatch Before Committee. 693 

and a District Attorney to act concerning such offenses. Wliat is 
the proof here with respect to the man appointed by Andrew C. 
Fields ? Because this is the last time I shall refer to that. It 
appears that there is a man performing substantially the duties 
of errand boy in the New York office, and so far as I have been 
able to. find out, or discover either in the evidence before the 
Armstrong Committee, or anywhere else, it is not charged that he 
, was guilty of any dereliction of duty, or that he ever had the 
opportunity, or having the opportunity, that he had the capacity 
to do it or ever did it. Do such things call for the removal of 
an honest man from public office ? 

I come to another most astonishing thing, I think, to the legal 
mind, and I quote the language of the message. 

“ That there is no satisfactory evidence that Mr. Kelsey en¬ 
deavored to master the situation and put the Department upon a 
proper basis.” In this charge no claim is made that he did not 
master the situation or that he did not put the Department upon 
a proper basis, but the presumption is raised that the Superin¬ 
tendent is guilty of some dereliction of duty because he did not 
prove himself innocent of something with which he had not been 
charged. My recollection of the result in civil cases, is that before 
you can fasten any liability against a man you must prove your 
case, and much more so where vou accuse a man of dereliction 
of duty, and yet in that language the rule is reversed and the 
Governor says that because he did not produce satisfactory evi¬ 
dence before him that he discharged his duty — not that he had 
not done it — he should be removed. When men shall be required 
to account for all their acts under the penalty of receiving some 
punishment then we shall have progressed far beyond what the 
rule of law is that governs men in official or in civil life. 

Now the further specification is in the recommendation of the 
message: “ But the more important work of the Department the 
greater the need to make it efficient and trustworthy.” I agree 
to that. “ The assiduity of a department chief in attention to 
details of routine cannot compensate for the lack of administrative 
capacity.” That may or may not be true. It depends upon how 
much capacity he is required to exercise. But certainly if he 
exercises his capacity to the needs of the situation which confronts 
him, then it fails. “ The passage of the laws will amount to 
nothing if they are not executed.” What does the Governor mean ? 
What does this message mean ? It must mean that Mr. Kelsey 



694 Senate Judiciary Committee. 

did not enforce the law of 1906, or else it means nothing? The 
implication fairly from that is that he did not do it, or else 
there is nothing to it except euphony of statement. 

u The passage of laws will amount to nothing if they are not 
executed. Provisions for publicity will not prevail if the super¬ 
vision of the State be feeble and inadequate. If examinations in 
the future are to be of the same description of those in the past, 
administration of the Department will not prevent recurrence of 
the old abuses.” Well, I agree to all that. But where in the 
message is it stated that the supervision of the law was feeble or 
inadequate? Or, rather, point out where it was. 

Where in the volume of testimony otfered before you does that 
appear ? 

And the recommendation closes with a statement which I quote, 
u I have been compelled with regret to reach the conclusion that 
Mr. Kelsey is not the man to have charge of this Department. His 
past neglect and want of force and initiative already displayed 
make it unsafe to accept assurances for the future. The excuses 
thal he now makes serve only to place in a more prominent light 
his misconception of his obligations and what the people of the 
State have a right to expect.” 

That is the message, and these are the charges. Those are 
the things that we are called upon here to meet. If we meet them, 
or if they do not exist in fact, then all basis for the removal of this 
man fails. So, I say, if we have shown that Mr. Kelsey dis¬ 
charged all the duties devolving upon his position, whether they 
were of primary importance or of secondary importance, then he 
cannot be said to have conspicuously failed in the discharge of his 
duties, or demonstrated thereby his unfitness for the trust con¬ 
fided in him. If we have shown that Mr. Kelsey was justified by 
events in retaining the services of Hunter and Vanderpoel, then 
we apprehend that failure to remove these employees was not a 
fault but a credit, and instead of showing an entire failure to 
grasp his duties it shows a clear mastery of the situation, for which 
he should receive commendation instead of condemnation. If the 
law was executed, if provision for publicity was adequately made, 
if the supervision by the State was strict and adequate, if examina¬ 
tions produced good results then a charge of a lack of adminis¬ 
trative capacity must fall to the ground, and, if in addition to that 
a complete mastery in detail of routine work has been shown, then 
as T understand it, we combine the highest efficiency, when coupled 


Closing Address of Mr. Hatch Before Committee. 695 

+ 

with integrity, which is here admitted of which a public officer is 
capable. If we have shown that he comprehended the law, and, 
so comprehending, exposed its weakness and defects and recom¬ 
mended amendments thereto which would assure greater efficiency 
and greater supervision, running the whole gamut of the law in 
this respect, then we have shown the presence of force and in- 
itiative of a very high order, in my judgment. 

How, that brings us to a consideration of the testimony in 
this case. I take it up in its order, or rather in the order in which 
it was received. Hie law of 1906 was the product of the investiga¬ 
tion by the Armstrong Committee. That law took effect in 1906 
shortly prior to the assumption of office by Mr. Kelsey. Measures 
had not then been taken to en'force this law. They were engaged 
in construing its provisions. Mr. Kelsey was not called upon 
certainly to rise higher than the fountain head of his duty, and 
the fountain head was the law itself. What were the things that 
it provided for which were of consequence to the insurance world ? 
It related exclusively to life insurance and did not touch the 
other branches of the government by*the Insurance Department 
relating to matters committed to its care and control. It pro¬ 
vided several things. In section 94 was contained the provisions 
for the election of directors, the purpose and object of which 
was that there might be expressed in the selection of directors 
of these insurance companies the voice of the policy-holders. That 
was its only object and purpose; that the companies should be 
no longer governed by the vote of proxies taken at the time of 
insurance, but that a method and scheme should be adopted by 
which the policy-holders of the companies should express them¬ 
selves as to who should be the persons constituting the governing 
bodies of the respective corporations. That was the sole purpose 
of it. Has it been done? Has that feature of the law been carried 
out ? If it has then who shall say that in the administration of the 
business of the Department the Superintendent has failed to en¬ 
force the law, or that its enforcement has been feeble and inade¬ 
quate. We produce evidence from the beginning, first through Mr. 
Kelsey, a statement of the various processes by which this election 
was worked out. We produced testimony of the throes through 
which he went, of a contest which is not equaled in bitterness in 
the most bitter political contest with which we are familiar, but 
which runs the gamut of the charges and countercharges in all the 
newspapers for months. When the International Policy-holders , 


69G 


SENATE juDICIAEY COMMITTEE. 


Committee, seeking by its voice and appeals to capture the govern¬ 
ing body of these corporations, organized its forces to gather in 
tills vote, then they sought the Superintendent of Insurance to 
get instructions and rulings upon the law, so that they might get 
ali the advantage to which they were entitled in the conduct of 
that election. You have heard from Mr. Kelsey upon that sub¬ 
ject; you have heard from Attorney-General Mayer and you have 
heard from the two gentlemen who are the inspectors of election 
and who are now conducting that election, and you have heard 
them describe the process. Let me ask any Senator on this Com¬ 
mittee if he can say that under the law the Governor himself could 
have devised a better scheme for carrying it into execution ? AV hat 
was intended was to procure an expression of the policy-holder, and 
the policy-holder, so far as lie lias been able to understand the law, 
lias expressed himself in the election which has been held and 
which is now in process of count in order to announce the result. 
'.Did section 9-1- contemplate more? You have heard the evidence 
that has been given here with respect to the knowledge of the 
Superintendent and his acts in connection with it; you have heard 
his plan for holding the election, the orders and rulings which he 
made, the selection of the five members of the board of inspectors, 
the whole machinery, and how it should be done. No man who 
listened to his testimony doubted the integrity of his purpose or the 
comprehension of the business which he had in hand. No man 
who sits here to try him can in his heart or in his judgment say 
that he did not meet the full requirements of the law. lie 
grasped his duty, he performed it, modestly it is true, but as 
efficiently as any other man could have performed it. And now 
the expression of the policy-holder is to be announced. Did the 
law require more? Was it expected that anything more under 
that provision should be accomplished? If so, nobody up to this 
time has been able to find it out. AYas he not diligent? Did 
he not seek the advice of the chairman of the Armstrong Com¬ 
mittee? Did he not go to Governor Hughes for his advice in the 
interpretation of the law? -Did he not gather about him all the 
sources of information which the situation presented and of which 
it was capable? Did he not, after hearing a multitude of counsel, 
and argument, pick out the safe way and follow it carefully and 
efficiently to the end? Such is the testimony, and no Senator upon 
this Committee or Governor in the Executive Chamber can truth¬ 
fully deny it. AVhat becomes of these statements then ? “ If the 


Closing Address of Mr. Hatch Before Committee. 697 

enforcement of the law be feeble and inadequate then good results 
\\ill not How therefrom.” A\ hat becomes of such a statement as 
ground for the removal of a public officer, in the face of this 
testimony concededly true? 

Hid section 94 ask for any more ? If it did, then Mr. Kelsey is 
not as much at fault as I am, because I read it to see if it did and 
I discovered nothing more therein. Must not then that charge fall, 
so far as the evidence is concerned, as to his enforcement of the 
law ? 

TV hat was the next ? Section 97, I think, provided for the limi¬ 
tation of expenses of insurance companies. We produced here be¬ 
fore you correspondence, volumes of it, and rulings upon that sub¬ 
ject, intricate in character, wherein all matters that have come be¬ 
fore the Superintendent of Insurance, or which have arisen in 
connection with these companies and the enforcement of the law 
had already been submitted to him and he had passed upon them 
and from time to time made rulings that ran the whole gamut of a 
most intricate and troublesome affair — with regard to the com¬ 
missions of agents, with regard to the valuations to be placed upon 
the policies, with the infinite detail which I could not begin to 
state, but which are in evidence before the Committee. There 
is no doubt, as Mr. Kelsey y has stated to you, but that 
provision of the law has been the subject of careful scrutiny, 
and his official acts have been read here and subjected 
to your scrutiny, and who can say that he had not enforced 
that provision of the law. What difference would it make 
whether Mr. Kelsey had dotted every I or crossed every T in 
connection with orders which he made? I suppose that in a great 
department such as the Department of Insurance of the State of 
Hew York, the same as any other great business department, em¬ 
ployees are there, and skilled employees are there for the pur¬ 
pose of giving information concerning the business of the Depart¬ 
ment and how it shall be conducted, and the very fact that the 
State pays for such special skill is a guarantee of an expectation 
by the man charged with the enforcement of the law that he will 
make use of the materials and things that are furnished for use. 

And so, when letters came asking for rulings under section 97, 
both Mr. Kelsey and Mr. Paterson, the actuary, state that they 
talked over the subject, that they reached a conclusion; that Mr. 
Paterson formulated sometimes the reply, and sometimes flip 


098 


Senate Judiciary Committee. 


i 


Superintendent did it, and wlien it went out from the office it went 
out as the act of the Superintendent. It was one of those attentions 
to detail which, as I understand it, makes the successful and effi¬ 
cient man. Did anybody say anything here that section 97 of the 
Insurance Law has not been enforced, and enforced along the lines 
that it was intended to be enforced and produced the results that 
were expected to be produced by it so far as”such results could be 
reached by its enforcement? If so, I know not where to find 
it. But the testimony here, and found in this record bears out my 
statement. Some other minor sections appear, but the next im¬ 
portant one is section 102. 

Section 102 takes into consideration the insurance business of 
the entire country. If I understand it and if I had drafted that 
law why I should have hesitated long before I put into section 102 
a discrimination against the insurance companies doing business 
in our State and in favor of the insurance companies doing busi¬ 
ness in other states and in this State, but incorporated in other 
states. Mr. Kelsey declared such to be the' interpretation of the 
law and was supported by the Attorney-General. Mr. Kelsey 
understood it. He did not fail to grasp his duty. He sought 
Senator Armstrong, and Senator Armstrong yielded that the in¬ 
terpretation of the law was correct, although he thought it a mis¬ 
taken provision. And I believe with the Senator in that, because 
it creates a discrimination against our own people and gives the 
benefit to outside parties, and I am not in favor of that, because 
I think that in the State of New York we should always have the 
best of everything. But that was the law. Mr. Kelsey went to 
the Attorney-General, and one of the deputies of the Attorney- 
General thought he might escape it. Escape it why? Because he 
did not want to impose restraints upon the insurance companies of 
this State, and wanted that they should stand upon an equal foot¬ 
ing with the insurance companies of other states. Then Senator 
Bulkley of Connecticut, who came over here with all of his poli¬ 
cies, which were prohibited under the laws of our State, and said 
he brought them here as he would bring merchandise, and the 
policy that he could sell the best in the State of New York was the 
policy that he wanted to sell, and that this law gave him the right 
so to sell it no matter what the four standard policies provided. 

The Superintendent listened to his arguments. The Attorney- 
General listened to his arguments, and they finally were com¬ 
pelled to decide that the Senator was right in this construction of 


Closing Address of Mr. Hatch Before Committee. 699 

the law. W as it a lack of comprehension by the Superintendent of 
Insurance of the provisions of section .102? Hid he not under¬ 
stand the question? Hid he not grasp his duty in that respect? 
Hid he not have capacity to know what he was doing? Hid he 
not decide the law as the law officer of the State and as he should 
decide it? Hoes that show, because the law was not the best and 
operated to the disadvantage of the companies here that the 
Superintendent should be removed on account of that? Was 
his enforcement of the law feeble and inadequate in that connec¬ 
tion? Such a thing, in view of these things appearing, becomes 
so puerile as to make it nearly ridiculous for me to discuss it. 

Section 103, what was that? Section 103 was the publicity 
section. You heard this testimony. Mr. Kelsey availed himself 
of\every scrap of information, and every source of information in 
order to get up these statements. 

To get up this statement, Mr. Appleton described what he did 
in connection with it and in connection with the convention which 
was held in Washington, and what thev did in connection with 
the other provisions, with the reports that were made with Wolfe’s 
statement, with all the other actuarial statements and with all 
of the other papers which were submitted. Mr. Kelsey thinks 
that is the most valuable provision in the law. Any man who sat 
here honestly seeking for light could not have failed to receive 
light from the testimony of Mr. Kelsey when suddenly there 
dropped into his hands that Wolfe statement and he said, “ Yes 
that is the one, because it groups the things together.” That is the 
one from which this statement was made up, complicated to the 
last degree. It was exhibited here before you. The resultant 
product of it was exhibited here this day, bearing date and issued 
from the Insurance Hepartment yesterday — a thing unheard of 
in the administration of the law of this Insurance Hepartment, 
when such information is laid before the Legislature when it is 
in session in the same year in which the results have been obtained, 
lie grasped his duty in connection with section 103, and seeing his 
duty, did it. The statement, to procure publicity to me is a mark 
of ingenuity and it has produced the results contemplated by the 
Hav. 

Any failure exhibited by Mr. Kelsey to grasp his duty in that 
connection? Any lack of capacity here shown in the statement 
which he made as to what he wanted to accomplish? Any diffi¬ 
culty in Mr. Kelsey stating orally here hour after hour the 





700 


Senate Judiciary Committee. 


processes by which he reached these conclusions ? If a, man 
understands a thing he can usually state it; if he does not, 
the lack of understanding in attempting to state it is usually pain¬ 
fully apparent. Is there any doubt in any man’s mind, who heard 
the testimony of Otto Kelsey as given here upon the stand, but 
that he comprehended those things ? Does it make any difference 
where he got his information, if he knew enough to do it and 
he got it, gathered it all together and then formulated it, as the 
law required, and promulgated it and it is in operation in the 
State to-day ? Is there any lack of capacity exhibited in that, any 
failure to grasp his duty exhibited there, any feebleness in any 
enforcement of the law that appears in that connection, any lack 
of administrative capacity there exhibited ? If there is, then I fail 
to discover it. Has anybody yet been heard to say, or to put their 
finger upon a single thing where this law has not been adminis¬ 
tered and enforced and carried out by Mr. Kelsey ? 

Section 101 of this law provided for standard policies. Any 
doubt in any Senator’s mind but that when Mr. Kelsey described 
the process by which it was made up he understood what he was 
talking about ? v Did he exhibit imbecility in connection with those 
subjects which would have prevented him from the capable en¬ 
forcement of the law? If he did, it was not visible on the witness 
stand; it did not appear there anywhere. There was section 94, 
section 97, section 101 for the four standard policies which have 
been exhibited here; section 102 which provided for this discrimi¬ 
nation; section 103 which provided for publicity. Will any Sena¬ 
tor now point his finger to a single particular in which that law 
was not enforced to the ultimate extent of which it was capable of 
enforcement, and that it is not in proper operation in this State 
to-day in as perfect a form as the law wiill permit? 

Senator Raines.—Judge Hatch, will you pardon me for inter¬ 
rupting you ? 

Mr. Hatch.— Yes, Senator. 

Senator Raines.— How many different forms of policies sug¬ 
gested did Mr. Kelsey select before the forms were finally adopted ? 

Mr. Hatch.— Something over a hundred. There were over a 
hundred from which he took out four as limited by the require¬ 
ments of the law and with patient attention and devotion to duty . 
worked out the intention of the law. In the face of that testi¬ 
mony and this result I read this as the reason why he should be 
removed and I read from the message recommending his removal: 



Closing Address of Mr. Hatch Before Committee. 701 

“ But the more important the work of the Department the greater 
the need of making it efficient and trustworthy. The assiduity 
of a Departmental Chief in attention to the details of routine, 
cannot compensate for a lack of administrative capacity. The 
passage of laws will amount to nothing if they are not executed. 
Provisions for publicity will not avail if the supervision of the 
State be feeble and inadequate.” 1 ask the judgment of this Com¬ 
mittee, I ask the judgment of a fair and unprejudiced mind, if in 
the face of that testimony .this ground or charge, if charge it be, 
does not utterly and completely fail and is not worthy to be con¬ 
sidered in the face of the testimony which has the sanction of an 
oath back of it. 

Senator Paines.— May I ask one more question ? 

Mr. Hatch.— Yes, sir. 

Senator Raines.— In formulating what is known as the ballot, 
were there a number of questions raised by the Policy-holders’ 
Association which were carried to the courts ? 

Mr. Hatch.—There were three, were there not, General Mayer ? 

Mr. Mayer.— Two went to the courts. 

Mr. Hatch.— One was brought and did not proceed. 

Mr. Mayer.— The mandamus matter and then the Farrelly case, 
which involved a great many details. 

Senator Raines.— Two ? 

Mr. Mayer.— Two actions. 

Mr. Hatch.— Many rulings which the International Policy¬ 
holders’ Committee asserted that Mr. Kelsey had decided wrongly. 
Let me say, Senator, that he had at least capacity to decide these 
questions. He had the disposition and courage to do it. He tried 
to decide them correctly, and he decided them, and the courts of 
this State said he had decided them correctly and sustained his 
decision. Yet in the face of the record then, I recur to the propo¬ 
sition wherein it is claimed that this man had not the capacity to 
discharge liis duties, and that if he had capacity he had not ex- 
' hibited it. Could the Governor, could any Senator upon this Com¬ 
mittee do more ? In answer, Senator, to the other question with 
respect to the four standard policies, there were other forms which 
were authorized — I think there were thirteen in number. 

Out of the hundreds of policies which were submitted to him 
he finally selected thirteen, and they have been exhibited here to 
, this Committee. He selected them, formulated and promulgated 
them, and he fulfilled the law. Wherein then, and how can it be 







702 Senate Judiciary Committed* 

said that this man did not fulfill every provision of law with 
respect to these life insurance companies which was contemplated 
or provided for. I pass that. Time will not permit of further dis¬ 
cussion. I say that this Committee upon the evidence cannot 
reach the conclusion that this man did not understand the law 
and fulfill it, interpret it and discharge his duties thereunder. I 
desire when it conies to a debate in the Senate to ask any Senator 
if he says that he did not faithfully perform his duties, to point out 
wherein and how he failed to fulfill the law, whether the Senator 
shall so state either from his own knowledge, from knowledge 
gained outside, or from anything that he heard either here or else¬ 
where. We are charged in addition to not possessing initiative 
and force. It is in the evidence here that when Mr. Kelsey en¬ 
tered upon the discharge of the duties of his office his first act was 
to have brought and laid upon his desk every letter and paper that 
came into that Department. He adopted that course for the pur¬ 
pose of enabling him to see the whole business of the Department 
so that he might not only become acquainted wfith its routine busi¬ 
ness, but to know what its whole requirement was, and day after 
day, day after day, until he had acquainted himself with the 
routine of the Department, and the business of the Department, 
that custom w T as carried out of his examining every single docu¬ 
ment that came there. I think his associates who served with him 
in the Legislature will verify the fact that a more methodical 
patient investigator never sat at a desk than he is, and those who 
sat with him in committees in connection with appropriations of 
the great State of Hew York, where the gruelling work of legisla¬ 
tion is done, know something about the capacity for work of 
this man, not only as to detail, but as to the capacity to understand. 

I shall feel almost a sense of personal humiliation if I shall 
find a man in this Senate who served with Otto Kelsey and knows 
him, that for any purpose shall weigh his case outside of the tes¬ 
timony here developed and vote to remove him for that reason. 
I should be unable to bring myself to that condition knowing the 
man. By this process of making himself acquainted with the 
affairs of the Department — with the affairs of his office, and 
the duties which he was called upon to perform, what did he 
find ? The insurance investigation stopped short with the three 
great companies of life insurance. It did not enter upon the 
others; but Mr. Kelsey, sitting at his desk with his correspond¬ 
ence coming before him, found that frauds upon poor people, 



Closing Address of Mr. Hatch Before Committee. 703 

people in straitened circumstances, in the fraternal and business 
associations, were being committed. They attracted bis notice. 
These frauds were still more villainous than the frauds per¬ 
petrated in these large insurance companies. Most of them could 
stand it. A person holding a policy there usually had the means 
to pay his premiums, but the villainy of a thing is to lay hold of 
poor men and abstract under some guise or other some part of their 
hard earnings. That condition is found in these business associa¬ 
tions and fraternals * and because they are the most helpless, they 
receive the least care both at the hands of the State or by others. 
There is no provision in this Insurance Law which specifically 
called the attention of Mr. Kelsey to these facts; no provision 
of the law there which charges him with specific duty, hut it was 
given in evidence here by Mr. Behan that the only time 
any investigation had ever been made by the Department in that 
regard was made when some shorn lamb complained to the De¬ 
partment and asked for relief, and then the subject-matter was 
taken up. But Mr. Kelsey found it here and in the multitude of 
his obligations and duties which overwhelmed him in that period, 
he still found time to take care of these things, and it has de¬ 
veloped that he for the first time in the history of this Department 
x established a Department that will clip the wings of those gentle¬ 
men who advertise in glowing terms and who have obscure pro¬ 
visions in by-laws for robbing people. There is no provision 
of law for that, but under the general supervisory powers of the 
Superintendent of Insurance, he picked this up as his duty and 
is performing it. He does not send to the newspapers an ac¬ 
count of the enforcement of the law in that respect and accom¬ 
pany it with his photograph. He is not engaged in any spec¬ 
tacular performance. He is a modest man, satisfied with the 
approval of his own conscience, carrying with him an integrity 
that enables him to walk each day with his fellow men with¬ 
out reproach, and that is his regard. This is the character of 
the man who is here before you at this bar; this is the man that 
you are asked to place a stigma and a stain upon by removing 
him from office. I say without fear of successful contradiction, 
knowing it to be verified by the evidence, and also verified by 
the personal knowledge of some of the men who know this man, 
that it is astounding that such a man should ever have 
been called to the bar and asked to answer for his discharge of 
public obligations which have come upon him in connection with 


704 


Senate Judiciary Committee. 


• 

this office. What is the particular quality that is called for that 
picks up a duty of his own motion ? Could you denominate it 
initiative ? If it is not initiative, what is it ? If a man is going 
to take the initiative, how is he going to do it, unless that was an 
illustration of it? Was there any failure in that regard, not only 
to initiate the proceeding, but to follow it through to a suc¬ 
cessful conclusion, and if he did that, did he not also show that he 
possessed initiative and also force ? This Department, for super¬ 
vising the fraternals, being established without any specific law or 
the need of it, the people who deal with those insurance companies 
will have some measure of protection, will have all the measure - 
of protection which the law permits,— which Mr. K;elsey can give 
them under law. Is he to be removed because he cannot give them 
more ? Is there any dispute about these facts ? Does anybody 
raise any cavil in connection with them? 

What more did he do in this regard? For the first time in 
the history of this State this man, lacking in ca23acity, force and * 
initiative, as somebody has said,— for the first time in the history 
of this State he formulated as the result of his nine or ten months 

t ■* 

service, a report to this Legislature, that it might have it upon 
their assembling and during the legislative session. A copy 
of it was laid before every legislator in the State. It has been, 
produced here, has been read here. It runs the whole gamut 
of the Insurance Law. Every word of it was drafted by this 
man, confessedly. Ho other body or person conceived the mak¬ 
ing of the report but he. Lie submitted it to the Governor 
for his inspection, to see if he could improve upon it or had any 
suggestions to make that would make it better or convey more 
information to the Legislature upon these subjects. The Gov¬ 
ernor approved, but had no suggestion to make. In that com¬ 
munication to the Legislature every single section of the law 
which the Superintendent had found might be improved, where 
he had thought that something could be done to amend it or, at 
least, where he thought it was wise to call it to the attention of 
the Legislature, was noticed. Thirty-four, and I am not. sure but 
it was thirty-eight, definite, specific provisions for improvements 
were suggested — stating the section of the law, what had been 
done under it, where it was .faulty, what could be done with it, 
and what he recommended. The Governor, I am sorry to say, had 
that document before him when he penned the words that this 
man lacked initiative and force. Never before, and I reiterate 




Closing Address of Mr. Hatch Before Committee. 705 

it, lias such a thing been done in the history of this State. How, 
if anyone is at fault in connection with that report, if there is 
any failure, it is not the failure of the Superintendent of Insur¬ 
ance. the Legislature he intended should examine it, and they, 
charged with the discharge of a public obligation, can find their 
information there with respect to needed amendments, or could 
call upon him to get further information concerning the subject. 
\\ ho of us, or all put together, could have done better ? Who 
could have done more than this man did in that regard? Having 
enforced the law and found wherein it Avas faulty, he brought 
it to the attention of the fountainhead that it might be cor¬ 
rected, where correction was possible, and improve where improve¬ 
ment was necessary. I am astounded when I think of the labors 
accomplished by this man in this short period of time, and his 
mastery of the situation, as exhibited by these things. 

You saw the multitude of documents that have been presented 
here in this connection and they verify, not only verify, but 
they establish beyond peradventure these facts, and if that does 
not indicate capacity and grasp of duty, a devotion to duty and 
an initiative in the discharge of duty, and enforcing its per¬ 
formance, then I know not how these words could be defined. 

I come to another matter involving a higher attribute of 
character. I come to another thing which involved an attribute 
of character that is most attractive among men, because I couple it 
with this devotion in the discharge of public duty, the attribute of 
courage — courage plain and pronounced, if not so spectacular as 
any man exhibited leading a battalion. I do not need to tell an 
intelligent body of men such as these that I am addressing, what 
the situation was in this case after the San Francisco calamity 
had come upon the country. It is known; known how precarious 
a panic, and added to the calamity in the West, another calamity 
in the East. I come now to what may be termed the main matter 
in this application for his removal. What did he do when he 
entered upon the office ? He found this situation in fire insur¬ 
ance circles, which has been described here more graphically 
under oath this morning than I can find language to describe it, 
falling from the lips of men whom no one upon this Committee 
will dispute or cavil at, as the establishment of a fact and a 
situation. What did this man do, this man who should be removed 
from office now, after the results of his acts have all been ex¬ 
ploited before the Committee under oath ? The first thing he did 

23 


706 


Senate Judiciary Committee. 


in that connection when this situation presented itself, was to go 
to the Governor of this State who had appointed him to office. 
When any man says that Mr. Kelsey did not grasp his duty 
and the situation, he makes a mistake. Mr. Kelsey may have 
acted mistakenly upon occasions, but it was not because he did 
not grasp his duty in connection with the situation which sur¬ 
rounded him. He knew of the Hew York office; he knew of 
the criticisms that had been showered upon Mr. Hunter and 
upon Mr. Vanderpoel; he did not need information upon that 
subject. He had read the report of the Armstrong Committee 
when he was'Comptroller. He knew what that contained. He, 
in the language of a distinguished Governor of this State, was not 
confronted then with a theory, but he was confronted with a con¬ 
dition, and under that condition he had to make use of his Hew 
York office and of the force that he had at his command. If I 
read aright the message of the Governor asking for the removal of 
this man, it is that he ought to be removed because he did not kick 
out Hunter and Vanderpoel from their offices and that he did not 
make it his business to search into every employee that he had 
there and kick as many of them as he could into the street. If it 
does not mean that, then I do not know what it does mean. He 
wanted a housecleaning. I want to ask any business man or any 
man upon this Committee what would have been the result had 
Mr. Kelsey, in the face of that calamity, in the face of that con¬ 
dition, adopted that theory of turning these men out and de¬ 
voting himself to a housecleaning arrangement and putting a new 
force into his office ? He comprehended his duty. That was not 
the fault. He had capacity, but he also had judgment, and he 
had courage, and what he did was to carry his trouble to the busi¬ 
ness Governor of this State and lay this whole situation before 
him. He told Governor Higgins the conditions, their critical char¬ 
acter, as he understood it, the criticisms that had been made 
upon these men, the situation that he was in, of the absolute neces¬ 
sity of keeping in touch with the fire insurance situation in the 
City of Hew York, and he told Governor Higgins that under those 
circumstances he thought he ought to retain the services of those 
two men, and Governor Higgins thought so too, and for those two 
thoughts operating together, this man now stands at the Bar of 
this Senate, and you are asked to remove him because of that fact, 
asked to remove him because the Governor disagrees with the 
judgment of Governor Higgins and the Superintendent of Insur- 


Closing Address of Mr. Hatch Before Committee. 707 


ance, because he thinks under those circumstances he should have 
acted differently. Never will you read again in history among 
men where a man is asked to be disgraced and sent from office 
with a stigma and a cloud attached to him under such circum¬ 
stances as these. Fortunate indeed it was that Governor Higgins 
and Mr. Kelsey acted upon the judgment of themselves under the 
situation that then confronted them. To-day business is not dis¬ 
turbed in fire insurance circles, not a single dollar has been lost 
by reason of credits based thereon, not a single policy-holder 
has suffered the loss of a single penny; but on the contrary, a 3 
testified to here this morning, billions of dollars of credit have been 
secured to business interests and more than eighty million dollars 
of fresh money has found its way into the coffers of the insurance 
companies of this State, and prosperity attends upon the whole. 
The Superintendent dealt with that situation; it required judg¬ 
ment, discretion, tact and courage; this man exhibited every single 
element of them; he faltered not, and failed not in one. Are you 
going to remove him for that ? Don’t you think after listening 
to these men here that came this morning under the compulsion of 
a subpoena, men who do not know this Superintendent of Insur¬ 
ance personally, but who did know Hunter and Vanderpoel, that 
the Superintendent was justified in retaining the two men ? They 
testified to what Hunter and Vanderpoel did, and that informa¬ 
tion was immediately transmitted to the Superintendent of In¬ 
surance ; he acted upon it; it was accurate information; it enabled 
him to deal with the situation; it enabled him to deal with it cor¬ 
rectly, successfully. The matter was of most transcendent im¬ 
portance, and as measured and tested by the supreme test of actual 
results, it justifies the course of the Superintendent. Was he 
justified then in retaining the services of these two men under 
those circumstances? What would you say now had he dis¬ 
charged those men and entered upon a spectacular drastic policy 
and precipitated a calamity in connection with the other? Then 
there might be some ground for removal; but here with the re¬ 
sults back of him, with a judgment which preceded what he ought 
to do, which is shown to have been well founded and that it was 
the best thing; then, I ask, what would you have said had he 
taken the other course and precipitated a panic ? 

Do I need to say more about this fire insurance situation ? 
I was going to read the correspondence in that situation. I want 
somebody to read it in the open Senate where it may be heard by 


708 


Senate Judiciary Committee. 


the Senators who have not listened to his testimony here. I desire 
that they should he enabled to judge of the capacity of the man 
by the letters which he wrote in answer to Mr. Moore. I want 
you to bear in mind that those letters were submitted to the Super¬ 
intendent by Governor Higgins as information to enable the 
Superintendent to act in the discharge of his duty. The Superin¬ 
tendent’s letter was in answer to that from Mr. Moore. I want 
you to understand and recollect, because it appeared here, what the 
ulterior purpose was in connection with the writing of these and 
other letters, and what was sought to be accomplished, and then 
read that letter, and let some man then dare to stand up and say 
that this man is not possessed of capacity and did not grasp his 
duty and was not devoted to the public interests. Ho man, after 
listening to that, can deny it and have the approval of that denial 
rest with his conscience. Governor Higgins was a business man, 
and when he had received the first letter from Mr. Moore and 
transmitted it, and then received the reply from the Superintend¬ 
ent of Insurance; when he had received the one from the Mer¬ 
chants’ Association and transmitted that to the Superintendent of 
Insurance and received the reply — when he again received an¬ 
other letter from Mr. Moore transmitted to him by the Governor 
— and then Governor Higgins, with full knowledge of the situa¬ 
tion, writes: “ Our friend, Moore, is still in a critical mood, 

but I do not think this letter of his needs any reply.” What do 
you think was resting in the mind of Governor Higgins when he 
wrote that letter ? Ho you think that he thought Mr. Kelsey did 
not exhibit the possession of ability and grasp of that situation, 
or but that he accepted and discharged properly his duty ? Gov¬ 
ernor Higgins knew what I said in my opening that I was afraid 
that Governor Hughes did not know when he sent his message 
here. There is not to this minute a particle of proof that the Gov¬ 
ernor knew the conditions respecting the fire insurance situation. 
If he had examined it, I believe that he would be inclined to ac¬ 
cept the judgment of Governor Higgins. If he disagreed with 
that judgment I am inclined to think that business judgment 
would accept the view of Governor Higgins and certainly so in 
the light of subsequent developments. I listened late last night 
in this room to the dramatic recital of the conversation between 
Attorney-General Mayer and Governor Higgins with respect to 
the fire insurance situation, when opportunity was offered to 
bring up for review, one of the rulings of the Superintendent be- 



Closing Address of Mr. Hatch Before Committee. 709 

fore the Supreme Court, where his ruling was sustained; and I 
listened with gratification to hear General Mayer state that the 
Governor said to him after this review of the critical situation, 
the necessity for doing everything to compose it, the absolute re¬ 
quirement of conservative action — that then he should say_ 

that he knew the State was fortunate in having at the head of 
this Insurance Department, Otto Kelsey, “ who could keep his 
feet upon the ground.” It was a tribute to the judgment and 
sense and courage of a man whom the Governor thoroughly knew. 
It will take a long while, among men who have followed the course 
of this trial close enough to understand it, to bring any great 
number to believe that Governor Higgins made any mistake when 
he appointed Otto Kelsey to the position of Superintendent of 
Insurance, or that Mr. Kelsey made any mistake in the concep¬ 
tion of his duties, and in their discharge, as measured here by 
the sworn proof. Most men will accept this statement, and those 
of his witnesses as establishing a condition which answers to the 
letter, and far beyond it, everything that has been urged against 
him or in favor of his removal. 

Much more there is in this case that might be talked about. 
This Committee knows the testimony. If I had before me 
Senators who had not heard this testimony, then I should have 
wanted to lay bare the details here, rather than to make this 
statement in connection with what the case shows and what has 
been established. I come here representing a man charged 
with official dereliction of duty; as yet there has not 
been included among the various assertions against him, the 
statement that he is not an honest man. I have heard it from 
the lips of Senator Armstrong, who has known him for 
more than a decade, served with him in the Legislature, and 
who has been his friend, and who knows, I believe, how cruel 
this charge is, that any statement that this man would make, 
whether under oath or without oath, he would accept, and accept 
as true. The Governor says, “ I do not impugn his integrity or 
seek to.” Well, gentlemen, I tell you that in this day and age it is 
a great thing to have a man in office who is an honest man, and 
whom, being an honest man, the peeople also know or believe to 
Be honest. If we can An this State surround ourselves in the 
administration and discharge of public duties with honest men, 
we can put up sometimes with a lack of ability or a failure 
to grasp duty, with a lack of capacity or a failure of 


no 


Proceedings in Senate, 


initiative or force. Indeed if we have integrity, perhaps we 
should he satisfied with the accomplishment of routine duties, if 
they are faithfully done, because the discharge of routine duties 
will ordinarily carry a business along to success. But this 
man of all the men connected with the administration of 
public duties, I think, for the last fourteen years in this city in 
various capacities, who has the reputation of having never faltered 
or failed in the discharge of one of them; who has with him the 
respect of every man, and as being honest and faithful in the 
discharge of duty, that with these conceded' facts is it possible 
that he is to be subjected to removal and stigmatized and dis¬ 
graced? It is an awful thing. No more cruel situation has been 
produced in this State within my recollection of the affairs of the 
State. In the history of the greatest tragedy of the world it ap¬ 
peared that a man charged with an offense was brought forth by 
Pilate who said,“ I bring him forth to you that ye may know that 
I find no fault in him; behold this man.” Those interested cried 
out in answer, “ Crucify him, crucify him.” I invite some Sena¬ 
tor that shall stand in the open Senate and ask that this man 
shall be removed from his office for cause, to put his finger upon 
a fact that calls for his removal, to specify fault or failure 
based upon this proof here, and founded on fact. We can say of 
him, “ I find no fault in him.” Let not then this Committee 
give answer back “ Crucify him, crucify him.” If it does, I 
believe that among all right thinking men in this State who knew 
the facts, that the Superintendent of Insurance will not need de¬ 
fense at the hands of his fellow men, whatever may be said of 
those who sit in judgment upon him. 


In Senate, May 1 ? 1907. 

Senator Davis, from the Committee on the Judiciary, presented 
the following report: 

The Judiciary Committee, to which was referred the message 
of the Governor, dated Albany, February 20, 1907, recommend¬ 
ing the removal of Otto Kelsey from the office of Superintendent 
of Insurance, respectfully report that they have heard the Super¬ 
intendent of Insurance, his counsel, and the witnesses he has pro- 



Kespecting Hearing Counsel Before Senate. 711 

duced, and received the documentary evidence offered and herewith 
submit the record thereof to the Senate for its consideration. 

And it further recommends that two hours time he granted 
the counsel for the Superintendent of Insurance to present his 
arguments before the Senate. 

That a vote of a majority of the Senators elected is necessary 
to effect the removal of the Superintendent of Insurance. 

That the question submitted to the Senate for its action shall 
he as follows: 

Shall the Senate concur in the message of the Governor, recom¬ 
mending the removal of Otto Kelsey from the office of Superin¬ 
tendent of Insurance ? 

That on taking the vote the roll call of the Senate shall be 
called and each Senator shall as his name is called make answer 
thereto “ Yes ” or “ Ho.” 

Senator Davis.— I move the adoption of the report of the 
Committee. 

Senator Armstrong.— I ask that that portion of the report, 
which recommends the granting of two hours to counsel to sum 
up before the Senate he excepted from the adoption of the report, 
and it be a subject for separate adoption or consideration. 

The President.— The question is on the motion of the Senator 
of the Forty-sixth, that the portion of the report referring to the 
summing up by counsel before the Senate be excepted from the 
adoption of the report. Is that correct ? 

Senator Armstrong.—• I move to adopt the report, except that 
portion or paragraph of it relating to the summing up by counsel 
before the Senate. 

The President.— Will the Senator put the motion in writing? 

Senator Kaines.— I have no objection to taking the sense of the 
Senate separately on this proposition; and I think.if the Senator 
asks simply for a division of the proposition, that it may be 
divided without objection. There will be no objection to his tak¬ 
ing a separate vote on that proposition. 

Senator White.— Was the report of the Committee read? 

The President.— It was read. 

Senator White.— Then I ask unanimous consent to have it 
read again. 

The President.— If there is no objection the Clerk will again 
read the report of the Committee. 

(Clerk re-reads report above set forth.) 


712 


Proceedings in Senate. 


Senator White.— It is merely a technical question, hut it ap¬ 
pears that the wording of the resolution should be that the Com¬ 
mittee shall concur in the recommendation of the Governor, and 
not concur in the message. The question is: Does the Senate 
concur in the recommendation ? 

Senator Raines.— The Chairman of the Judiciary Committee 
said that is the exact wording of the statute. The Senator from 
the Thirty-ninth says that the Chairman of the Judiciary Com¬ 
mittee is mistaken in that. 

Senator White.— The question is whether or not the Senate 
should concur in the recommendation of the Governor, and not 
in the message of the Governor. The message is but a mere form 
for transmitting the recommendation. 

Senator Davis.— I ask that the word “ message ” shall be 
changed to recommendation. 

The President.— If there is no objection the word “ message ” 
will be changed to <e recommendation.” 

The Clerk.— So that it shall read: “ That the question sub¬ 

mitted to the Senate for its action shall he as follows: Shall the 
Senate concur in the recommendation of the Governor, recom¬ 
mending the removal of Otto Kelsey from the office of Superin¬ 
tendent of Insurance.” 

The President.— If there is no objection the amendment will 
be ordered. The Chair hears none. Now, is there objection to 
the motion of the Senator from the Forty-sixth, that the report of 
the Judiciary Committee be divided; that the question first be 
taken on the motion, that the part of the report relating to the two 
hours’ summing up by counsel be a matter of separate adoption. 
If there is no objection to that course it is so ordered. The ques¬ 
tion then is on the adoption of so much of the report as omits 
reference to the summing up by counsel. 

Senator Raines.— It would give me great pleasure to hear 
the reasons of the Senator from the Forty-sixth for his motion, as 
I assume he has some. 

The President.— All in favor will please say aye. The ques¬ 
tion is carried. 

Row the question is on the part of the report which 'provides 
that counsel for Mr. Kelsey shall have two hours in which to 
sum up. 

Senator Armstrong.— Mr. President. 

The President.— The Senator from the Fortv-sixth. 

e/ 






Respecting Hearing Counsel Before Senate. 713 

. Senator Armstrong. I have heretofore attempted to voice my 
dissent fiom the conclusions of some of my brethren on the Com¬ 
mittee as to the proceedings in this important case. 

Senator Solnner. \\ ill the President please ask the Senator 
to speak louder so that he may be heard on this side of the 
chamber. 

Senator Armstrong.— I have hitherto attempted to voice my 
dissent from some of my brethren on the Committee as to the 
procedure which was to be adopted, or had been adopted, and 
have been so thoroughly misunderstood on at least one occasion 
that I do not desire to be misunderstood on this. I am not seek¬ 
ing to curtail the privileges of Mr. Kelsey, nor to curtail any 
opportunity which he may have, or desire, -or his counsel, to 
present to this Senate in the fullest possible manner his case 
and everything that pertains to it. But it seems to me that the 
recommendation which we are now considering is so ridiculous 
as a matter of procedure that it should not pass and be adopted 
without at least passing notice. Kow witness the situation: The 
Governor of the State transmitted to the Senate a message recom¬ 
mending the removal of the Superintendent of Insurance. There¬ 
upon the Senate referred that recommendation and message to 
the Judiciary Committee of the Senate for its consideration and 
to report with such recommendation as it should see fit — or 
that in substance. Then the Senate Judiciary Committee en¬ 
tered upon a hearing, or adopted a resolution that it would hear 
Mr. Kelsey and his counsel and such witnesses, and receive such 
documents as he might see fit to produce or read and submit. 
Then the Judiciary Committee proceeded to a. hearing and de¬ 
voted many days to it. It was opened in a formal way by an 
opening by counsel. Mr. Kelsey was put under oath, witnesses 
were examined, and counsel regularly summed up before the 
Committee, and as far as any intimation has been made up to 
the time the hearing closed the Senate Committee had proceeded 
in a way which although I deemed it to be irregular somewhat, 
and attempted to protest when it was being adopted, gave Mr. 
Kelsey every opportunity to present all the facts of his case 
in order that the Senate might have the 'benefit of the conclu¬ 
sions of the Senate Judiciary Committee on the question. Kow, 
having gone that far, the Senate Judiciary Committee refuses to 
make a recommendation, although it is well known that its mem¬ 
bers have arrived at conclusions by this time, and that so far 




714 Proceedings in Senate. 

as the recommendation is concerned it might have recommended 
for or against concurrence with the Governor’s recommendation, 
without doing violence to the position of any member on the 
Committee. But it chooses not to 1 do that, and in addition 
recommends what seems to me extraordinary, that counsel for 
the Superintendent be afforded two hours in which to sum up 
the case before the full Senate, at the same time reporting the 
proceedings back to the Senate without findings, recommenda¬ 
tions or conclusions on the merits. Now prefacing what I had to 
say by saying that I do not wish to be understood as wishing to 
deprive Mr. Kelsey and his counsel of any opportunity they 
may desire, I say that this proceeding of the Senate Judiciary 
Committee is so'ridiculous that the Senate might as well have re¬ 
ferred this matter to the* stenographer of the Senate to take the 
testimony and report. Having referred the matter to the Senate 
Judiciary Committee to hear and determine or recommend, the 
Senate Judiciary Committee has dodged its duty and reported 
the matter back to the Senate, or rather the evidence taken after 
all these proceedings, without recommendation or determination, 
and with the strange recommendation that the matter be re-sum¬ 
med up before the Senate. I think that relegates the Senate 
Judiciary Committee to" a very unfortunate, indeed to the very 
ridiculous position I have characterized it. Instead of being 
an agency of the Senate for the assistance of the Senate in de¬ 
termining this question — the Committee has become a mere 
scrivener — a ministerial body to mechanically transcribe the tes¬ 
timony and report it back to the Senate. It was not for any such 
purpose that the matter was referred to the Judiciary Commit¬ 
tee. It was never my intention that it should be so disposed 
ol;. It was the intention of the Senate to procure, as it had a 
right, the judgment of so important a Committee as the Judiciary 
Committee, every member of which is a lawyer of more or less 
skill and more or less experience; and instead of that the Senate 
Judiciary Committee has deliberately resolved that instead of 
performing the duty it was set to perform it will relegate itself 
to the mere ministerial duty of taking the testimony, transcrib¬ 
ing it and reporting it to the Senate with the recommendation 
that the counsel be heard for two more hours before the Senate. 
When all that has been done what more could have been done 
if the matter was referred to the stenographer of the Senate to 
take the testimony and report it back to the Senate. It seems 


Respecting Hearing Counsel Before Senate. ^15 

to me it is carrying tlie anomalous condition which was produced 
when all these witnesses were summoned under process for a 
purely ex parte hearing, without analysis of the testimony or 
cross-examination of the witnesses, to an extreme which is or 
ought to be unheard of. My position has been from the outset 
that when the Senate Judiciary Committee adopted its original 
resolution, partly in the performance of its duty and partly in 
response to the request of Superintendent Kelsey that it would 
hear Mr. Kelsey and his counsel and receive such documents or 
depositions as he saw fit to submit, it was doing exactly as it 
should have done, and that when it departed from that line and 
entered upon a proceeding having all the functions of a trial 
without any of the substance — went through the form of a trial 
which was in form only because it possessed no elements of 
analysis of the testimony or cross-examination of the witnesses, 
or other things that should have been had at a hearing or trial, 
that we surrendered the substance for the form. What I have 
attempted to voice on the floor of this Senate was misunderstood. 
I have contended that that hearing of the Superintendent was 
an ex parte hearing, of him and what he had to say in response 
to the recommendation, and receiving everything he had to say 
or to submit in the shape of depositions or documents or state¬ 
ments pertaining to the issue, and that when we went beyond that 
we were pursuing an indefensible course. Kow having gone 
through the form of a trial without its substance, and the form of 
an examination under oath without its substance — an utterly 
lifeless ex parte thing, no elements of which should have differed 
from an ordinary hearing in an ordinary committee matter — 
we add to the ludicrousness of the situation and its absurdity 
by reporting back the evidence taken, without recommendation or 
finding, but with a recommendation that counsel be now allowed 
two hours in which to sum up before the Senate. I suppose 
the purpose of this procedure is already apparent to anybody 
sitting in this Senate. I do not mean to impugn anything unjust 
to anv one in this Senate, nor do I wish to make any other im- 
putation; but before this matter is passed upon by the Senate 
I wish to call attention to the ridiculousness of the situation 
in which the Judiciary Committee has placed itself, and if this 
recommendation is 'adopted, to the farcical character of the pro¬ 
cedure as far as this proceeding is concerned. If it were a 
matter which had been a trial in fact as well as in form, it would 



710 


Proceedings in Senate. 


have been pre-eminently a matter for the Judiciary Com¬ 
mittee to adopt findings for the Senate’s consideration. It 
might have been proper to report upon the findings without 
recommendation, but not even findings of fact have been pre¬ 
sented, the form of the trial stops at the point where it could 
have been efficient. The Committee might have at least found 
ivhat the facts were for the Senate, but it didn’t even see fit to 
do that. It unwisely and, in my opinion, ridiculously relegated 
itself to the position, by a majority vote, of having refused to 
perform its duty, and in addition casts the duty upon the Senate 
of recommending that a summing up to last not more than two 
hours be allowed ex parte to the counsel for the man whose re¬ 
moval is recommended. Now let me repeat before closing that I 
hope no Senator will charge me with an attempt, deliberate or 


otherwise, or insinuate that I ani seeking, to curtail Mr. Kelsey’s 
opportunities. As far as he is concerned I am willing and 
anxious that anything he or his counsel could desire shall be 
done, to the end that the final vote shall be taken after 
everything proper shall have been done by Mr. Kelsey or his 
counsel, but I think this particular procedure and recommenda¬ 
tion we are discussing produces so ridiculous a result that the 
Senate should not concur with the recommendation of the ma¬ 
jority of the Committee which has recommended so strange and 
anomalous a procedure. 

Senator Hinman.— Let us understand just what the proposi¬ 
tion is here now. This matter was referred to the Senate by the 
Executive of this State with a recommendation from him and a 
message stating his reasons or grounds for making the recommenda¬ 
tion. That matter is before this Senate. This Senate must pass 
upon that recommendation, and either concur or non-concur therein. 
When that matter came to the Senate, the Senate by virtue of the 
power vested in it referred it to the Judiciary Committee, and 
the direction of this Senate was that the Judiciary Committee, 
with all convenient speed, report what disposition should be made 
of the matter. That was the instruction of the Senate to one of 
its committees. The Judiciary Committee has proceeded with the 
hearing, and it has given to the Superintendent the opportunity 
to be heard and the opportunity to be represented by counsel, the 
opportunity to present his witnesses, the opportunity to present 
evidence; and the Superintendent has availed himself of that 
opportunity. I have agreed with the Senator from the start, 


Respecting Hearing Counsel Before Senate. 717 

and I agree with him now, that there was a duty imposed upon 
that Judiciary Committee of reporting to this Senate what dis¬ 
position should be made of this matter, and I believed then and I 
believe now that acting under that recommendation from this 
body the Committee should have so acted, and the Senator knows 
I so voted in the Committee; but we were in the minority. That 
matter is again here to-day on the report of the Committee for 
the consideration of this Senate, and the time is coming directly 
when each member of this body must determine for himself 
whether he will vote yes or no on the resolution offered here. 
How the Senator savs this is farcical and he uses an illustra- 

t j 

tion, and it is apt, that this might as well have been referred to 
a referee to hear and report; and that is what this Senate has 
done with it. Precisely. This matter was presented to the 
Senate and it was referred to a Committee as the court would 
do to a referee, to see what it would do; and that Committee 
proceeded as a referee would proceed. I agree with the Senator 
that this is not strictly a hearing; it is an ex parte proceeding — 
there is no question about that; but this Committee standing 
as a referee has taken testimony and has referred it to the Senate, 
as a referee would have referred it, and the Senator knows 
that in any reference of any matter to a referee when the matter 
comes before the court, as it comes before this Senate, counsel 
may be present and may present the views he entertains on the 
proposition. How, as far as making a farce of it is concerned, 
there is nothing of the kind here. There are members of this 
body who desire to hear counsel for Mr. Kelsey. I fail to 
understand from the Senator any statement of any ground of 
harm that can come by hearing the counsel for the Superin¬ 
tendent. How the matter is here before the Senate for its 
action. I believe with him (Senator Armstrong) that the Ju¬ 
diciary Committee did not discharge or perform the duty im¬ 
posed upon it. I voted with him upon that proposition — and 
I am with him to-day; but the major part of the argument he 
made should have been made to the whole report of the Committee. 
I assume that members of this Committee who were not present 
and did not hear the discussion of counsel for the Superintend¬ 
ent, desire to hear his presentation of his side of the case. As 
for me, I would be glad to have the Governor, if he saw fit — I 
suppose he will not — to have counsel appear and present his 
views. I do not believe that in the message of the Governor there 


I 


718 PROCEEDINGS IN SENATE. 

are any charges. I do not believe, strictly speaking, this is a 
trial. On the other hand, I believe this body is sitting as a 
quasi-judicial body, both as jurors and as a court, to determine 
this matter, and it must be determined; and if any one can 
point out what possible harm can come by allowing the counsel 
for the Superintendent to appear and state his position, I will 
be glad to hear it. There is no reason I know of why,- inas¬ 
much as this Senate, is a quasi-judicial body in this matter, 
sitting as such, it should not hear both parties to the fullest extent. 

Senator Saxe.— I quite agree with the views of the Senator 
from the Forty-sixth. I think this Judiciary Committee has put 
the Senate in a very anomalous position. Now the Senator 
from the Thirty-ninth says that here is the case of a reference 
made bv a court to a referee — but it was a reference to hear 

t/ 

and determine, and not a reference to take testimony and report 
back, How then this report simply says: Here are the pro¬ 
ceedings had before our Committee — and as a part of those pro¬ 
ceedings they transmit — 

Senator Cohalan.— Does the gentleman mean to say that the 
Judiciary Committee could determine this proceeding — could 
determine whether or not the Superintendent of Insurance should 
be removed ? 

Senator Saxe.— In the same way a referee can determine a 
question referred to him — that is, subject to the approval of the 
court. 

Senator Smith.— Does not the Senator as a lawyer know that 
when a referee to hear and determine makes his report, judgment 
• is entered on that report, and the only way to review that is by 
appeal to a higher tribunal ? 

Senator Saxe.— That is true in a sense. 

Senator Smith.— Then the Judiciary Committee was not a ref¬ 
eree to hear and determine ? 

Senator Gilchrist.— Does not the Senator mean to say that it 
is similar to a case where the referee is appointed to take testi¬ 
mony and report his opinion thereon ? 

Senator Saxe.— That is it exactly. 

Senator Davis.— Will the Senator kindly state to this Senate 
what question of fact was to be determined by the Judiciary 
Committee. 

Senator Saxe.— The question of competency is one — the ques¬ 
tion of procedure might be considered rather a question of law. 








Respecting Hearing Counsel Before Senate. 719 


Senator Davis.— That is the Senator’s understanding of section 
22 of the Public Officers Act ? 

Senator Saxe.— I explained some time ago, when the matter 
was before the Senate, about giving the Judiciary Committee more 
power — my view of section 22 of the Public Officers Act. I 
stated then that I looked upon that section as I would upon a 
similar section in the by-laws of a corporation which empowered 
the directors to remove an officer of the corporation upon the 
recommendation of the president of the corporation. 

Senator Foelker.— Is it not customary before the report of 
a referee is confirmed that counsel are usually heard ? 

Senator Saxe.— Yes; counsel on both sides. The point I am 
striving to make, Mr. President, is this: That here the Judiciary 
Committee has transmitted its record of the proceedings, includ¬ 
ing the summing up of counsel. How those who sat upon that 
Committee had an opportunity to cross-examine witnesses brought 
before them, and therefore they were in position to judge of the 
value of the summing up of counsel in the proceeding — at least 
much better position than those who did not have that oppor¬ 
tunity and who are now called upon to pass upon the proceedings. 
That point should be taken into consideration. How, perhaps, 
counsel for Mr. Ivelsey did not have opportunity before the Com¬ 
mittee to say all he had to say upon the subject. That I know 
nothing about. If it is so it is the fault of the Committee. At 
any rate all he did say is before us and unless he has more to 
say or was denied the opportunity of saying more, it seems to 
me it is unnecessary to have this further summing up before the 
Senate. HTow I am in hearty sympathy with the argument of the 
Senator from the Forty-sixth because I think it is absolutely 
sound. 

(Senator ITill takes the chair.) 

Senator Fuller.— Hot being a member of the Judiciary Com¬ 
mittee which has heretofore been expressing its views on this 
question, I wish to say a word as to the w T ay in which the matter 
impresses me personally. There has been a good deal of talk 
in regard to academic questions, as to referees, as to masters in 
chancery, and one thing and another. This is a very practical ques¬ 
tion we have to decide. It is this: Why should Mr. Kelsey be 
brought here to argue this case before the Senate? How we must 
presume that every man in this Senate ha/S read the testimony 
given by Mr. Kelsey and the other witnesses. I presume that every 



720 


Proceedings in Senate. 


man in this Senate has read the testimony given by Mr. Kelsey 
when lie was before the Governor, and I cannot believe that any 
member of this Senate will rise and vote on this serious question 
unless be has read that testimony. I do not see how he can do it. 
That is a duty he cannot avoid. We know all that has been said. 
It is not a question of hearing the counsel for Mr. Kelsey that we 
are to pass upon, but the ultimate question will be we were to 
hear Mr. Kelsey, and we have given Mr. Kelsey that hearing; 
we have the testimony in printed shape before us; we know it; and 
what more is there to hear ? Why should it he expected that Mr. 
Kelsey’s counsel should come here and present his views of that 
testimony ? The questions for us to decide are: What are our 
views of that testimony ? and I think Ave as members of this 
Senate are competent to pass judgment upon that record without 
assistance from any counsel Avhatever. 

Senator Paines.— I do not know but the Senator from the 
Forty-sixth has again precipitated a discussion Avhicli unless the 
good sense of the Senate decides otherwise may last the balance 
of the day; but I hope it will not continue very long, as we have 
other matters of importance to attend to. The difficulty of this 
whole matter arose from the action of the minority and not a 
majority of the Judiciary Committee when it decided on its 
course of procedure. I haven’t desired, nor have I publicly or 
otherwise criticised the Judiciary Committee. I have left that 
for the Senator from the Forty-sixth to do, as he has done this 
morning. But if I were going to criticise the course of the Judi¬ 
ciary Committee I would criticise that course from the very 
beginning, when Avith the knoAvledge that there Avere precedents 
for the case noAV before us, they ignored all precedents by a 
minority vote of that Committee and proceeded on their oAvn 
initiative to a course which Avas never pursued before and which 
never took into consideration that there Avere any other portions 
of this jury to be consulted than that portion which composed 
the Judiciary Committee of the Senate. The Senator says Ave 
haA r e had a trial with its form but without its substance. There 
Avas never a moment, if the Senator and his friends had desired, 
but they could have had counsel for the Governor appear, and a 
trial before this Senate, as I suggested Avhen I referred to them the 
reports of the other trials that had been held; but the course of 
the Senator from the Forty-sixth has been consistent in this from 
the very start. He has not been Avilling to assume for a moment, 


Respecting Hearing Counsel Before Senate. 721 

nor lias the Senator from the -Nineteenth, that there were any 
chaiges here against Mr. Kelsey for the Senate to pass 0115 conse¬ 
quently there was no occasion for a trial, but simply an occasion 
foi statements from Mr. Kelsey, and so in the commencement of 
the procedure they undertook to limit Mr. Kelsey to his own 
statements in this matter or to such evidence as he might present 
to the Committee. Well, the Committee on one occasion got to 
its bearings and decided by its action that there were charges 
and very important charges against Mr. Kelsey, and they decided 
^ ' * might be heard under oath, and produce wit¬ 
nesses who should be sworn, and that he should appear by 
counsel. The Senators from the Rineteenth and the Forty-sixth 
both said that they were conferring a great privilege upon Mr. 
Kelsey which he was not entitled to have unless by the courtesy 
of the Senate. What! A man under serious charges to be tried 
by a jury of the Senate; a verdict to be rendered by a jury of 
Senators and not entitled to have counsel except by the courtesy 
of the Judiciary Committee! A most strange proposition; yet 
it appears in the proceedings in the statements of both the Senators 
referred to. Row the difficulty is this, and it has developed since 
the first meeting of the Judiciary Committee, and that is they 
started on wrong lines. If they had provided for a trial before 
the Senate as precedent demanded, this matter would have been 
disposed of weeks ago. There would have been no occasion 
for such action as has been here, and if the Governor had 
chosen to appear by counsel he would have been here; there 
would have been cross-examination, although what use was there 
for cross-examination, as the Senator from the Forty-sixth had 
stated over and over again that he would accept every state¬ 
ment of Mr. Kelsey without his being placed under oath. There 
was the difficulty. They started on a wrong line of procedure, 
but finally justice prevailed and this man under charges was 
permitted to be sworn and produce his evidence, and it is 
finally summed up and laid on the desks of the Senators. Row I 
hope the Senator from the Eighth is not mistaken in regard to 
his supposition that every Senator around this circle has read all 
the evidence about this case. If he is not mistaken there can be 
but one result of the vote when it shall be taken on the floor of 
this Senate. The Senator from the Forty-sixth has understood 
that from the beginning, consequently he has tried to get away 
with the idea that there were no charges against Mr. Kelsey, but 


722 


PROCEEDINGS IN SENATE. 


that it was simply a question or proposition for the Senate to 
coincide with the views of the Governor in regard to this matter. 
Why ? Because he knew from his intimate acquaintance with 
Mr. Kelsey and that department that the moment that testimony 
was put in form and produced before the Senate that there would 
be an end to anything depending upon the proof of the charges 
made in that document. Consequently he has wanted no trial; 
he says he has not wanted to throw anything in the way of Mr. 
Kelsey, but when he argued not once but twice and thrice against 
Mr. Kelsey having an opportunity to be sworn, I thought there 
was something being thrown in the way of Mr. Kelsey in the pro¬ 
gress of this case. And it was because with his good sense and 
his knowledge of Mr. Kelsey he knew that the testimony to be 
produced before the Judiciary Committee and transmitted to the 
Senate would knock these charges — well, I do not know into 
what — but it would make everybody regret that any charge of 
this kind was ever made and presented to the Senate. So he has 
been consistent in his course and he does not want to throw 
anything in the way of Mr. Kelsey in this examination. Oh, no! 
The Judiciary Committee, a part of it at least, has heard all the 
evidence. They have heard the summing up before the Judiciary 
Committee and the Judiciary Committee consists of only thirteen 
members. That is all of this jury which has heard this case 
out of fifty-one Senators; out of fifty-one Senators thirteen have 
heard the evidence and the summing up, and I hope all of them 
have read the evidence since it was taken. I know I have, but 
still there are but thirteen of the jury out of fifty-one, and is it 
ridiculous that the balance of this jury of fifty-one should have 
the privilege of hearing what the counsel of Mr. Kelsey has to 
say about the evidence produced in this examination, as well as 
the jury of thirteen who have made a report of their recommenda¬ 
tions to this Senate ? You can’t, tell from that report just the 
position that any man of the Judiciary Committee takes in re¬ 
gard to it. There is nothing in the report to show it. 

Senator Page.— Does the Senator, criticise the report of the 
Judiciary Committee for not having a report in it? 

Senator Paines.— I am not criticising it. I am saying we 
are fortunate in getting a report from the Judiciary Committee 
under all the circumstances. I do not criticise the report of 
the Committee because under the resolution, which I introduced, 
I know I never contemplated it should make a report on the 



/ 


Respecting Hearing Counsel Before Senate. 723 

merits of tlie case. I know there is no precedent for the Judiciary 
Committee taking the course of procedure which was initiated 
in this case. To be sure it has been driven step by step into a 
trial. A portion of the Committee tried to avoid it, but they 
could not escape the logic of the situation and were compelled to 
yield—even the Senator from the Nineteenth and the Senator 
from the Forty-sixth were compelled to yield, we will say, to the 
good sense of the majority of the Committee, and permit a trial 
in form, even if without the substance, as the Senator from the 
Forty-sixth says. Now this discussion has been raised by the 
question whether the other members of this jury who are to 
decide on their conscience I hope, and not on the hope of 
favor or the fear of punishment, who are to decide on their 
consciences as to what should be done in this matter, shall have 
the privilege of hearing what the Judiciary Committee, the 
thirteen members who have been sitting on this jury, have already 
heard. Senators, is there anything ridiculous about that? Is 
there anything unfair about that ? The Senator from the Thirty- 
ninth analyzes things pretty closely, and he cannot see anything 
unfair about it, but it remains for the Senators from the Nine¬ 
teenth and the Forty-sixth to see something unfair or ridiculous 
in the proposition. I hope, Mr. President, that the resolution 
to hear counsel for Mr. Kelsey for two hours may be passed 
unanimously by this Senate. 

Senator Page.— I had not intended to say anything, but what 
I do say will be very brief. The Senator from the Forty-second 
has never been seen to get on his feet recently without attempt¬ 
ing to get me on my feet. I do not know why. I did not know 
that he was entranced with my views. The Senator has been 
very eloquent and very passionate in his appeal in this case. He 
says that the jury that is to pass on this question has not heard — 
What? Naturally you would think that a jury was to decide a 
case, and what they wanted to hear would be the evidence. He 
does not say that the jury shall hear the evidence, but that the 
jury should hear the paid attorney of one of the parties who 
comes before the Senate and sums up the evidence and gives his 
ex parte statement, which cannot be -replied to by counsel, no 
matter how much the facts were misstated. They are not to de¬ 
cide on the evidence, but upon an appeal to passion and preju¬ 
dice by a paid attorney. That may be a judicial proceeding. It 
may be we have made a mistake in our judicial proceeding in 




724 


Proceedings in Senate. 


having witnesses called and evidence produced. It may have 
been a great deal better if counsel had arranged the facts and 
presented them for determination. Of course, I recognize as 
being one of those who sat on the trial of this case that if we had 
the evidence we would have largely the statements of counsel, 
because those of us who sat on the Committee saAV how skilfully 
and adroitfully the statements were put into the mouth of the 
witness by counsel, and the witnesses on the stand assented merely 
to the leading questions put by counsel. It may be in that 
view of this case that the Senator from the Forty-second is right, 
that when w r e have counsel before us we really have all the 
witnesses before us, because we have the one who testifies. Flow 
I do not see but what this question has got to be thrashed out 
in the Senate. The Senator from the Forty-second will speak 
according to his like and according to his views of the testimony. 
Some of the others of us in a feeble way may probably state to 
the Senate how those matters have been carried through. It will 
be decided as all questions that come before this body are set¬ 
tled, and that is by discussion of the Senators pro and con. It 
may be this very clear case which no. man can consider at all 
without immediatelv becoming convinced, and the Senator from 
the Forty-second says, that the case is so clear; but if it is, why 
supplement the arguments of Senators by the arguments of the 
paid attorney? Why take two hours of our time in listening to 
the argument of counsel, when we have got to discuss the ques¬ 
tion and thrash it out ourselves. I hope the motion of the Sena¬ 
tor from the Forty-sixth will prevail. 

Senator Davis.—• The position of the Senator from the Forty- 
second to my way of thinking is certainly erroneous, and he 
bases his opinion upon two precedents, he claims, that should 
be adopted by this Senate. As a matter of fact there never has 
been a precedent established in this State upon a proceeding of 
this kind. The precedents referred to by the Senator from the 
Forty-second are the cases of Smyth, Superintendent of Insur¬ 
ance, and Ellis, Superintendent of Banks. In those cases the 
charges were preferred, not by the Governor, but by some out¬ 
side individual, the Comptroller, as I remember it; and the 
charges were submitted to the Governor, and the Governor with¬ 
out any recommendation whatever transmitted them to the Senate 
for the Senate’s consideration, in the form of specifications of 
fact, so that the officers charged with dereliction of duty could 


Respecting Heiaking Counsel Before Senate. 725 

answer specifically each one or all of the charges that were made. 
Now this matter is entirely different in every respect, and it 
is the first time in the history of this State that this question 
has been presented to the Senate in this form. 

Senator Raines.— If it won’t interrupt the Senator, I would 
like to ask a question. In view of the statement lie has made, does 
he not consider that in this case the charges coming from the 
Governor himself, and not transmitted through the Governor, are 
of more importance than were the charges in the other cases ? 

Senator Davis.— In reply to the Senator from the Forty-second, 
I wish to state that there are no charges here preferred by the 
Governor of this State against the Superintendent of Insurance, 
Mr. Kelsey, and there is no reason for it. There is no reason for 
it under the law. Section 22 of the Public Officers’ Act reads as 
follows: “An officer appointed by the Governor by and with the 
advice and consent of the Senate may be removed by the Senate 
upon the recommendation of the Governor.” So that on the 20th 
day of February, 1907 , when the Governor of this State trans¬ 
mitted to the Senate his message wherein he stated to the Senate, 
“ I recommend the removal of Otto Kelsey from the office of 
Superintendent of Insurance,” he could have stopped right there, 
and upon that message being handed down by the President of 
the Senate, any member could have made a motion there and then 
to have concurred in the recommendation of the Governor. Had 
that question been put as provided by section 22, and twenty-six 
members of the Senate had voted to concur in the recommendation 
of the Governor, the Superintendent of Insurance upon the proper 
certificate of the Clerk of the Senate would have been out, and 
his office would have been vacant. 

Senator Raines.— I know the Senator is going to make a good 
speech, but the speech must be all made over to-morrow if the 
agreement he and I reached is ratified by the balance of the Senate, 
namely, that this case be made a special order for to-morrow, 
after Reports of Committees and be disposed of if we can get to a 
vote on this. Still I would like to hear the Senator go on. 

Senator Davis.— If the Senator would prefer to hear me again 
I will talk to him this evening, and then I won’t have to do it 
to-morrow. But as far as devoting two hours’ time for the hearing 
of counsel for Mr. Kelsey is concerned, there is no occasion for it. 
There is no occasion for it; and while it may be very interesting 
it will not aid this Senate for one moment in assisting the Senators 


726 


Proceedings in Senate, 


to arrive at a conclusion for tlieir final vote. The Committee 
heard the Superintendent of Insurance. On the 20th day of 
February, 1907 , the same day that the message was received, 
I received a letter from the Superintendent of Insurance, stating 
that he was informed that the Governor had that day transmitted 
to the Senate a message in which he recommends that he he re¬ 
moved from the office of Superintendent of Insurance, and that 
such message had been referred by the Senate to the Judiciary 
Committee. That in that connection, he begged to say that before 
any action is taken thereon that he would like to have an oppor¬ 
tunity to be heard before that Committee, and assumed that such 
an opportunity would be granted, and that he would have suitable 
notice thereof. In response to that communication, Mr. Kelsey 
was invited to appear before the Committee, and he did so in per¬ 
son and by counsel. JSTow there is reason to criticise the action of 
the Judiciary Committee; if it is subject to any criticism, it is 
in the fact of its report which it presents this morning without 
recommending to the Senate the concurrence or non-concurrence 
in the recommendation of the Governor. It is an escape of re¬ 
sponsibility that no Committee of the Senate is justified in taking 
of making. 

Senator Cobb.— I do not desire to occupy the time of the 
Senate more than for a moment, but it seems to me there is one 
feature of this matter which has not been called to its attention. 
I am one of those upon the Judiciary Committee who believes 
that this matter in the first instance should have been referred to 
the entire Senate. I have not changed my mind about that 
proposition for the reason that the Senate as a whole must ulti¬ 
mately determine this question; but the Committee in its wisdom 
decided otherwise, and the evidence has been taken, and the sum¬ 
ming up has been had before the Committee, and submitted to 
this Senate. Kow I ask the Senators around this circle whether 
they can point me to a precedent in the history of this body, or 
the United States Senate, or any other body,* where after a matter 
has been referred to the Senate and evidence has been taken, and 
the summing up has been had and the Committee has submitted 
its report, that lawyers on either side have been permitted to come 
before the Senate and again address that body on the proposition. 
But the Senator from the Forty-second says all the Senators 
should hear the summing up. It may be said, with as much 
propriety that they should hear all the evidence. The summing 



Respecting Hearing Counsel Before Senate. 727 

up is printed and every word of it is before the Senators; and 
as the Senator from the Eighth says, every word of it has been 
lead, and many of the Senators have read the summing up before 
they read the evidence, because it is most entertaining. How 
can any one point out to me after the evidence has been submitted 
and the summing up has been submitted, and all is before us, why 
we should open the doors of this body to permit attorneys to come 
here and again sum up on the same facts presented in the printed 
document which is before the Senate ? How we are making his¬ 
tory here. TV e are establishing a precedent, and it is important 
to this body whether they shall say that after that proceeding ha 3 
been gone through with and a hearing and summing up before a 
Committee, they shall again have the summing up after presenting 
the evidence on which you are to decide, to again sum up before 
the body as a whole. If it were a question of sitting here four 
or six hours for the purpose of hearing counsel for Mr. Kelsey, 
and any Senator or two Senators wanted to do so, I would be 
glad to do it. But that is not what is involved here. Mr. Kelsey 
has had a hearing and has had his counsel present his case, and it 
is a question of whether it is dignified and in harmony with this 
body and other legislative bodies to again have counsel come here. 
My own judgment about it, although I regret that I disagree with 
many members of this body for whose opinion I have great respect, 
my own judgment is that this portion of the resolution should be 
defeated. 

Senator Grady.— AVe have discussed about everything but the 
resolution now before the House, and we have spent just fifty-five 
minutes in determining whether we would listen to somebody 
else for not more than two hours. If the Senator is anxious for 
a precedent where, after summing up before a committee, counsel 
was allowed to sum up before the Senate, I can give him one. 
It was not as big a case as this, but it was a case that found its 
way into the books. It is the case of William McDonald who 
refused to answer certain questions put to him by an investigat¬ 
ing committee in Hew York. The question of contempt was 
referred to the Judiciary Committee, and he attended before 
the Committee with counsel; the counsel made his plea and the 
Judiciary Committee decided against him, and then he was 
brought before the bar of the Senate for contempt, and upon 
order of the Senate his counsel was heard. I do not think we 
are making history in this case. There is much about this case 


728 


PROCEEDINGS IN SENATE. 


that most everybody will be glad to forget. All we are doing 
is this: That there are some of the members, and we might as 
well face the practical question, who cannot in the duties im¬ 
posed upon them take up your printed volume of evidence and 
point out here and there in that evidence just what tells; for 
whatever contention may be made, in Mr. Kelsey’s behalf or 
against his position, and I voted — so I won’t appear as ridicu¬ 
lous as some of my brothers -— I voted to give counsel two hours 
in order to save the Senate ten. I believe that will be the effect 
when you come to have the counsel present the side of Mr. Kelsey. 

Senator Davis.— Will the Senator from the Fourteenth prom¬ 
ise not to talk if wd permit the counsel for Mr. Kelsey to do so ? 

Senator Grady.— Ko, sir; because I know the Senator from 
the Fiftieth will say some foolish things that will have to be 
answered. How, Mr. President, the simple question before the 
Senate is whether they believe they will be aided by what coun¬ 
sel may say — I mean in making up their mind from the evi¬ 
dence in the case — and I am glad to know that we start off 
with a perfectly unbiased and impartial judgment. The Sena¬ 
tor who last addressed the Senate prior to my taking the floor 
has made up his mind that the summing up is the most inter¬ 
esting part of Mr. Kelsey’s case. 

Senator Cobb.— Have you read it, Senator ? 

Senator Grady.— Yes, sir; and listened to most of it. I 
havep’t made up my mind as to that. The Senator from the 
Forty-sixth occupies a little more advanced position. The day 
the Governor’s message was here he was ready to hear Mr. Kel¬ 
sey and all he may say, and it would not change his mind a 
particle; he was ready to vote before he heard Mr. Kelsey, and 
he was ready to vote the same way afterward. The Senator 
from the nineteenth has been entirely consistent: The Governor 
wanted Mr. Kelsey out, and that is the beginning and the end. 
He is an arm of the Executive and the Executive should have 
one arm which suits the other arm. Put there are some Senators 
who have not made up their minds — I don’t say I am not in 
the most advanced position of any Senator in the matter of 
making up his mind — but there are some Senators who would 
be aided in their review of the testimony by the counsel’s sum¬ 
ming up. The position of the prosecution is that no matter 
what may be said of or about Mr. Kelsey, as long as on the 20th 
of February, 1907 , Eobert Hunter and Mr. Vanderpoel were 






Respecting Hearing Counsel Before Senate. 729 


in that office, that settles the question. If it is admitted that 
Hr. Vanderpoel and Mr. Hunter were in the office — Mr. Van- 
derpoel, not on the 20th of February, but on the 1st of February, 
and Mr. Hunter on the 20th, that settles it. The Senator 
from the Fiftieth has suggested that it was entirely proper for 
the Governor to say, I recommend the removal of Otto Kelsey, 
the Superintendent of Insurance,” and to stop there. If he had 
stopped tl^ere his message would have gone no further. It 
would have been on the table waiting for something else to come 
along. But he did not stop there. He understood he must give 
reasons why the Superintendent of Insurance should be removed; 
and the weight of those reasons had been tested. How then 
criticism has been found against the Judiciary Committee for 
not making a recommendation. What does that mean ? It means 
that every man here was to determine the question by and for 
himself. As suggested by the Senator from the Forty-second, a 
majority of that Committee believed that every word of evidence 
in this case should have been given before the whole Senate; 
that we should have been the trial court of the charges made 
against Mr. Kelsey. That is what the majority was to believe; 
and a majority must now believe that Senators are not to vote 
to sustain or defeat the recommendation of the Committee, but 
to vote on the evidence regardless of what disposition there may 
be of the questions before the Judiciary Committee. And that is 
why no recommendation was made; and yet it is said because 
that position was taken, that position which recognizes the con¬ 
scientious observance of your oath of office by the Senators, has 
placed the Committee in a ridiculous position, and that we 
have failed in the work that was committed to us. We were not 
appointed referees to hear and determine; we were not appointed 
referees to hear and present findings; we were not appointed for 
that. We were appointed to consider a message of the Governor, 
and we have considered it. We have permitted whatever answer 
might be made to all that it contains to be presented, and that 


is before you, and the simple question involved in this is whether 
in reaching the intelligent, conscientious discharge of your duty 
as judges trying a man upon very definite charges presented in 
a message of the Governor, you will be aided by counsel occupy¬ 
ing not more than two hours of your time. 

Senator Armstrong.—I only rise, believing everything that 
is to be said has been said, to say in relation to the remarks 



730 


Proceedings in Senate. 


of the Senator from the Fourteenth, that I am embarrassed be¬ 
cause I am one of the few men in the Senate charged with 
having my mind made up, and it looks now as though I were 
out of place — 

Senator Grady.— Did the Senator so understand me ? 

Senator Armstrong.— I did. 

Senator Grady.— My suggestion was that you had your mind 
made up before the case began. 

Senator Armstrong.— Then let us understand the Senator that 
way. I suppose I am the only man who had his mind made up. 
Of course, I assume that the Senator who makes that suggestion 
against me did not make up his mind until this morning or did not 
reach a conclusion until this morning. That is not a fact. We all 
know it is not a fact. We were not born yesterday; to-day is not 
our birthday. We know the facts. Most of the Senators about this 
circle have had distinct impressions about this case from the 
outset and most of them have failed to disguise it. What else 
does this mean except that we would like to afford an excuse for 
any of the “ weak sisters ” to see that “ we are right.” It means 
that everything has been resorted to that human ingenuity could 
think of — first, to delay the case and then to afford an oppor¬ 
tunity to get the fellows on the side they wanted them on, in my 
opinion. I am not going to stand up here and be accused of 
certain things without telling you exactly my opinion of what I 
think about this case, whether it is pleasing or no. I move for 
a call of the Senate. 

The Clerk announced as a result of the call that all Senators 
were present. 

The President.— The question now is on the motion of the 
Senator from the Forty-sixth in relation to adopting the second 
section of the report of the Judiciary Committee. As your names 
are called you will answer for or against that proposition. 

Senator Taylor.— Mr. Chairman, what is the second section ? 

The President.— The Clerk will read it. 

The Clerk.— And it further recommends that two hours’ tune 
be granted to counsel for the Superintendent of Insurance to 
present his argument before the Senate. 

Senator White.—And may I ask, Mr. Chairman, just the form 
of the question which we are voting on. 

The President.— You are voting on the adoption of that 
tion, no motion having been made to strike out. 


sec- 



Respecting Hearing Counsel Before Senate, 731 

Senator Armstrong.—• You are voting “ aye ” to adopt that 
portion and u no ” in refusing to adopt it. 

Ihe President put the question whether the Senate would 
agree to the second clause of said report, and it was decided in 
the affirmative, as follows: 

For the Affirmative. — Ackroyd, Allds, Boyce, Cassidy, Cordts, 
Cullen, Emerson, Fancher, Foelker, Franchot, Frawley, Gilchrist, 
Grady, Grattan, Harte, Ilaesenflug, Hill, Hinman, Hooker, Mc¬ 
Call, McCarren, McManus, Mullaney, Owens, Raines, Rams- 
perger, Smith, Sohmer, Sullivan, Thompson, Travis, Tully, 
Wemple, White, Wilcox — 35. 

For the Negative.— Agnew, Armstrong, Burr, Carpenter, Cobb, 
Cohalan, Davis, Dunn, Fuller, Gates, Heacock, Knapp, O’Keil, 
Page, Saxe, Taylor — 16 . 

The President.—The report of the Committee has been adopted. 

Senator Davis.— I move that this matter be made a special 
order for to-morrow morning immediately after the Reports of 
Committees. 

Senator Armstrong.— Does the Senator mean that this is to con¬ 
clude it, the summing up and the final vote on the proposition ? 

Senator Davis.— That is the intention; yes, sir. 

Senator Armstrong.— I suggest that the motion then be that 
this matter, meaning the recommendation of the Governor, be 
disposed of as a special order to-morrow morning. It is plainly 
understood that the final action is to be had to-morrow. 

Senator Raines.— It is plainly understood to be this: That 
this matter be made a special order immediately after the Reports 
of Committees to-morrov T , and that we shall proceed to hear coun¬ 
sel, and if it is necessary and it comes to lunch time, we will take 
a recess and then come back, and the design is to dispose of it. 

Senator Armstrong.— Supplement that with the understanding 
that the special order be continued until the matter is disposed of. 

Senator White.— I am as anxious as anybody to see the matter 
disposed of, but I do not propose if one-half a dozen of these men 
are dead or stricken down to finish it to-morrow. I think it should 
be a matter of honor to finish tomorrow, any reasonable contin¬ 
gencies excepted. I suppose that is the understanding. 

Senator Davis.— That is the understanding. 

The Chairman.— You have heard the motion of the Senator 
from the Fiftieth that this matter be made a special order for 
to-morrow morning, immediately after the Reports of Committees. 




I 


732 ' Proceedings in Senate. 

All in favor say aye. All opposed, no. It is carried, and so 
ordered. 

Senator Raines.— I think under the rules you will have to make 
it a roll call. So I ask for a roll call. 

The President put the question whether the Senate would agree 
to said motion, and it was decided in the affirmative, as follows: 

For the Affirmative .—Ackroyd, Allds, Armstrong, Boyce, Burr, 
Carpenter, Cassidy, Cobh, Cohalan, Cordts, Cullen, Davis, Dunn, 
Emerson, Eancher, Foelker, Franchot, Frawley, Fuller, Gates, 
Gilchrist, Grady, Grattan, Harte, Hasenffug, Heacock, Hill, 
Hinman, Hooker, Knapp, McCall, McCarren, McManus, Mul- 
laney, O’Neil, Owens, Page, Raines, Ramsperger, Saxe, Smith, 
Sohmer, Sullivan, Taylor, Thompson, Travis, Tully, Wemple, 
White, Wilcox — 50 

For the Negative. —-Agnew—1. 


In Senate, May 2, 1907. 

The President announced the Special Order, being the further 
proceedings in the matter of the recommendation of the Governor 
for the removal of Otto Kelsey from the office of Superintendent 
of Insurance. 

Pursuant to the provisions of the report of the Committee on 
the Judiciary, Mr. Davis presented to the President Hon. Ed¬ 
ward W. Hatch, Hon. Julius M. Mayer and Hon. Daniel E. 
Ainsworth, of counsel for Mr. Kelsey. 

The President.— The Chair will make that an order. The 
Senate is now ready to hear the counsel. 

Mr. Hatch then addressed the Senate as follows: 

Judge Hatch.— Mr. President and Senators, I desire before en¬ 
tering upon a discussion of the matter which this day engages the 
attention of the Senate, on behalf of the Superintendent of In¬ 
surance, to express to the Senate his thanks for this his first 
opportunity to be heard before the body that will determine his 
fate. I desire further to state, notwithstanding reports to the 
contrary, that this case before the Senate stands alone, discon¬ 
nected from 'any other subject than that which alone affects 
the Superintendent of Insurance. Neither the Superintendent 
nor his friends are interested, so far as he is concerned, with 





Address of Mr. Hatch Before tiie Senate. 733 

any pending legislation now before the Legislature, no mat¬ 
ter to what subject it relates or how deeply other people may be 
interested therein. Notwithstanding reports to the contrary per¬ 
sistently stated in the public journals, the case of the Superin¬ 
tendent of Insurance stands alone, and standing alone he asks that 
this body now sitting as a judicial body shall treat it and dis¬ 
pose of it upon the evidence according to the justice of the case. 
No other issue enters into it, or ought to affect it, and I hope no 
other considerations will obtrude to obscure justice and that the 
case of Mr. Kelsey will be disposed of by -the Senate upon its 
merits as it deserves to be. So Mr. Kelsey, speaking through his 
counsel, appears at this Bar this day to present his case, and as 
thi s is the first time since the beginning of this proceeding when 
Mr. Kelsey has had an opportunity to be heard by the body hav¬ 
ing the power to adjudicate upon his case, it becomes proper 
that we understand the proceeding, its nature, the question to 
be decided, the effect of the judgment that shall be pronounced, 
and also to consider the testimony which has been adduced. On 
the 20th day of February last there was laid before the Senate 
a message from His Excellency the Governor, recommending the 
removal of the Superintendent of Insurance. That message, as 
I hope to be able to show by its very terms, contained a charge of 
neglect of duty by the Superintendent of Insurance in the admin¬ 
istration of the affairs of his office. It had specifications, 
not separated from other matters it is true, but still there, and 
with it the recommendation by the Governor that the Senate re¬ 
move him. Recognizing the law, as the Governor did, that there 
was no power upon his part under the law to remove the Super¬ 
intendent of Insurance by individual action, he made a recom¬ 
mendation to the Senate to act under*section 22 of the Public 
Officers Law, and he invited it, the members of this august tri¬ 
bunal, to join with him in accordance with the law and remove 
the officer. The matter which engages the attention of the Senate 
presents all the essential elements and in very fact formu¬ 
lates issues for a trial. The Senate had settled by precedent what 
the course of the proceeding should be. It had previously de¬ 
termined that where a message of recommendation for removal 
came from the Governor as was the message of recommendation 
in the Ellis case, based upon charges and made to the Senate, that 
the individual so charged became entitled to a trial, not by a part 
of the body or one of its Committees, but by the Senate itself, 


734 


Proceedings in Senate. 


that alone has the power finally to adjudicate upon the case. No 
Committee under the law had the power to try this man, and no¬ 
where is there to be found authority therefor resting in any prin¬ 
ciple of law. The precedent was followed in the Smyth case. 
Notwithstanding established precedents and the insistence of the 
Superintendent of Insurance and his counsel that he was en¬ 
titled to a trial, he has been denied that right and it has been by a 
slow and pitiful process that he finally finds himself for the first 
time before the Bar of the Senate whose conclusion must deter¬ 
mine his fate. He comes here for that reason handicapped beyond 
measure. ITe was entitled to have evidence heard from his own 
lips in answer to the charges brought against him; he was en¬ 
titled to have the body who should consider the merits of the 
charges and the evidence adduced thereon, listen to his story; he 
was entitled to have his witnesses brought here, that those who 
should sit in judgment upon him might be able to see plainly 
the manner and hear distinctly the voices of the men he 
brought and consider their character as well as the testi¬ 
mony which they gave. There is ' a vast difference be¬ 
tween the living vital force of oral testimony falling from 
the lips of a witness, and reading it in cold print after it has 
been given. Mr. Ivelsey has been denied that opportunity. He 
was entitled to have the character and weight of his witnesses 
exhibited before the Senate so that it could determine not onlv 
as to the quality of the testimony, but of the quality of the wit¬ 
nesses that gave the testimony; and when that was refused, much 
of the benefit to which he was entitled was denied him. We 
were first told by the Chairman of the Judiciary Committee of 
the Senate that we could not have a record made, that no stenog¬ 
rapher should be called to make a record for this man with 
respect to what was his case and what his defense. We were 
first denied the right to swear witnesses until the sense of fair 
play interposed, and w r e were given the opportunity to have 
Mr. Kelsey’s statement taken under oath, and then by divided 
vote were given the right to subpoena witnesses; had subpoenas 
not been issued v T e would have been unable to produce the char¬ 
acter of men and the quality of testimony which v 7 as ultimately 
produced before the .Committee. And finally there has been an 
attempt to make a construction of the message which would de¬ 
prive this case of the elements of a trial, and an attempt also to 
distinguish it from the precedents v 7 hich have been established. 


735 


Address of Mr. Hatch Before the Senate. 

We passed through all these processes before the inherent 
character of the case was forced upon the Committee, as it 
has been upon the Senate. I think that this w T as a trial of this 
man in the nature of a trial by impeachment, of which this 
Senate is the court, and the judgment which it shall pronounce 
shall be the same judgment that would be pronounced in the 
case of the impeachment of an officer. The difference between 
this and an impeachment is that in an impeachment under the 
Constitution there are particular rules which are required to be 
observed. In the impeachment of an officer outside of the Con¬ 
stitution those rules are not provided, but the impeachment it¬ 
self as a trial results in precisely the same judgment, not less, 
not more, so that in every element of this case in the form in 
wffiich it was brought into the Senate there are charges to 
be heard; these charges presented an issue, and upon such charges 
we were entitled to give evidence; we w T ere entitled to be 
heard by the body having the power to remove us, and thus all of 
the essential elements of a trial might be and should be carried 
out in the ordinary course of justice. 

It has been said that such, however, is not the fact, and it has 
been reiterated again and again that there were no charges here 
and no issue to be tried. If there had been no charges here 
then the application or recommendation of the Governor would 
have been for the Senate to remove, because acting together they 
had the power of removal. But the Governor took no such 
view of the statute; took no such view of the proceeding which 
he was about to institute, or of the power which he was about 
to invoke. He has not invited the Senate to exercise its power 
upon the case of Mr. Kelsey as a bare exercise of power, but he 
has invited this power to weigh, as he has weighed, the evidence 
which was laid before him, and he recommends that the Super¬ 
intendent of Insurance be removed, not because the Senate has the 
power to remove, but because the Superintendent of Insurance 
ought to be removed for cause. 

Look at the first opening clause of the message and see whether 
these statements be correct or not: “ I recommend the removal 

of Otto Kelsey from the office of Superintendent of Insurance. 
With respect to life insurance Hew York is easily the most im¬ 
portant jurisdiction in the United States, if not in the world, 
and the vast interests involved imperatively require, and it 
should be a point of honor for the State to maintain a fearless 


736 


Pkoceedings in Senate. 


and efficient administration of its supervising department com¬ 
manding the confidence of the people. I recommend Mr. Kel¬ 
sey’s removal because as head of this Department he has conspic¬ 
uously failed to 'perform obvious duties of the first importance, 
and his neglect has demonstrated his unfitness for the trust con¬ 
fided in him.” Will any lawyer sitting in this Senate, bearing 
the honorable commission to practice law before the courts of 
this State, deny that this is not a charge of neglect of duty ? 
That charge is a general charge, but it is a charge that this man, 
the Superintendent of Insurance, has neglected his duty. That 
is the reason why his Excellency asks this Senate to remove 
him — because he has been guilty of neglect. Ah, but I am 
told that there are no specifications here, and without specifica¬ 
tions there can be no charge. The gentlemen who utter those 
sentiments failed to read what is contained within this message. 
There are specifications here. Let me formulate them. They 
should have been formulated and presented to the Superintend¬ 
ent of Insurance so that he might have joined issue thereon, and 
presented his defense to the issue thus made. A further part of 
the pleadings, because this message is a pleading, may be what 
is termed in law as “ inducing causes ”— matter of inducement — 
leading up to what the specifications are. What is it ? It is a 
recital with respect ‘ to the irregularities which were disclosed 
by the investigation conducted by the Armstrong Committee of 
the life insurance companies in the city of Kew York; and 
then it says with more inducement than of charge, with more 
of inducement than of specification, but yet of specification it 
finally says, put in legal phraseology: “ Mr. Kelsey has been 

guilty of neglect in that he failed to remove the First Deputy, 
Mr. Hunter, who was guilty of failing to perform his duty from 
time to time in connection with his obligations relating to the 
discharge of the duty that was imposed upon him in connection 
with his supervision and examination of life insurance com¬ 
panies. And Kelsey is guilty of neglect and impropriety in 
continuing him in office; and that his neglect has so continued 
for nine months, during which time the deputy has so remained 
in the office.” Is not that a specification — that we were guilty of 
neglect of duty because we did not remove Mr. Hunter? And 
then in the next paragraph Kelsey was guilty of neglect because 
he did not remove Mr. Yanderpoel, the Chief Examiner, who 
had been guilty of making false reports in connection with life 








• Address of Me. Hatch Before the Senate. 737 

insurance companies; and that lie had been so continued in office 
until his voluntary resignation in January of this year. Is not 
that a charge of neglect ? The neglect specified being in connec¬ 
tion with two men wherein he, the Governor, says we ought to 
have removed them. If that does not state charges and make 
specifications then I am utterly unable to construe language or 
understand what it means. Further, it says, by way of specifica¬ 
tion, that we are guilty of neglect because — and now 1 read it: 
“ There is no satisfactory evidence that Mr. Kelsey had endeavored 
to master the situation and put the Department upon a proper 
basis.” We were guilty of neglect, because there was no evi¬ 
dence that we had endeavored to master the situation and put the 
Department upon a proper basis. The charge there is neglect. 
The specification is that there is no evidence that we did these 
things. Ko evidence from whom ? We were required not only 
to meet charges but required also to prove our innocence of any 
neglect of duty in connection with that matter. If so, then per¬ 
haps that specification might be sustained, because we certainly 
did not offer proof, as we did not deem it necessary, for we were 
not required to offer proof until some charge supported by testi¬ 
mony was brought against us. Further, another specification, we 
were guilty of neglect because we did not have the capacity to 
understand or the disposition to undertake the important work 
of the Department, and therefore there was greater need of mak¬ 
ing it a Department of efficient and trustworthy service. We are 
guilty of neglect because the assiduity of a Department Chief, 
even though he possessed it, in addition to the details of routine, 
cannot compensate for the lack of administrative capacity. There 
is a specification that we were guilty of neglect because we did not 
comprehend the situation and because we did not have sufficient 
capacity, and because we only possessed the ability to give assi¬ 
duity to detail. Finally the message says, we were.guilty of neg¬ 
lect because we did not execute the law. Is not that what this 
language means ? “ The passage of laws will amount to nothing 

if they are not executed. Provisions for publicity will not avail if 
the supervision of the State be feeble and inadequate. If exam¬ 
inations in the future are to he of the same description as those 
in the past, the administration of the Department will not prevent 
a recurrence of the old abuses.” Does not the Governor there 
charge us with failure to fulfill the law, both as to all of the 

24 

j 




738 


Proceedings in Senate. 


statute and as to a part of the statute relating to publicity ? If it 
does not, then I fail to understand what the message means. 

We are also guilty of neglect because we lack force and initia¬ 
tive for the discharge of the duties brought to our attention. 

Those are the specifications contained in the message. They 
could be drafted by a lawyer in perfect form and perfect specifi¬ 
cation in a short time, and that would present the issues. The 
mere change of form cannot change the essence of these charges; 
the mere change in form’cannot be resorted to to work injustice; 
the mere change in form cannot deprive this man of his rights; 
the mere change in form cannot deny him the right of having these 
charges established, and established by legal evidence, and when 
so established that he should have an opportunity to meet them. 

That would have been a trial. That is what the Superintend¬ 
ent of Insurance was entitled to, in which the Governor or his 
representative, through the law officer of the State or otherwise, 
could have brought to this Bar all of the evidence to prove the 
charge as made and prove the specifications made under the charge 
as contained therein. 

We then would have had the right, and it was our right, to have 
presented our proof in answer to whatever of proof was brought 
against us. So I say, as in the beginning, that we have labored 
at a disadvantage in this that until this moment we have not had 
opportunity to present the case of the Superintendent and have 
it considered by the body vested with the power to remove him. 
We have had no evidence under oath here that the charges con¬ 
tained in the message or the specifications were true, and no wit¬ 
ness has been called to show wherein and how we were guilty of 
neglect of duty. But what has been done is: That under the 
message there being no satisfactory evidence that we had dis¬ 
charged our duty — that is the language of the message—and 
acting upon that (although the effect of this judgment is the 
same as a judgment of impeachment), instead of the Superintend¬ 
ent of Insurance having a trial, he has been compelled to meet 
the issue presented and prove his innocence of the charges thus 
made. 

It is a singular thing in the light of this, the beginning of 

the Twentieth century, that it becomes a rule of law that a man 

% 

must establish his innocence — and I defy any man to read that 
message and take into consideration this proceeding, and deny 
that such is the fact, if its rule be applied. We should have 


Address of Mr. Hatch Before the Senate. 730 

had a trial before this body. We now have the remnants, thanks 
to the sense of fair play of this august tribunal; we now have 
the opportunity to present the remnants of the trial, taking upon 
ourselves the burden that the Superintendent of Insurance has 
established by evidence under oath, that not only is the charge 
made a mistaken one, but that it is absolutely and overwhelm- 
ingly established that it is mistaken, and that instead of being 
guilty of any neglect of duty he has risen to the occasion upon 
every occasion and discharged to the full the obligations that rest 
upon him by virtue of his office. 

I call attention to the fact'that the Governor of this State 
had before him, and in his mind, and alone considered, only one 
branch of the great work that is committed to this Department 
and supervised by it. I invite the. attention of the Senators 
again to the opening paragraph of the message with respect to 
life insurance: kk With respect to life insurance New York is 
easily the most important jurisdiction in the United States, if 
not in the worldand then, throughout the whole of it, where 
is there a word or a line which shows that the message, or the 
Governor, ever considered any of the other obligations and duties 
imposed upon the Superintendent of Insurance in the discharge 
of his duties. 

So the Governor had before him when he penned this message 
the knowledge which he had acquired in the Armstrong investi¬ 
gation with respect to the life insurance companies of the city 
of New York — and he had nothing else. It is not only dis¬ 
proved here, but established as far as it was able to be estab¬ 
lished, that the Governor neither in private life nor in official 
stations ever communicated with the Superintendent of Insurance, 
ever asked for any information from his Department concerning 
the affairs of the Department, although it was tendered to him 
upon the 2d day of January by a written notice. No proof 
that in private life he ever visited the Insurance Department or 
knew what its duties were, or the work it was doing, but with 
the five -volumes of the report of the evidence of the Armstrong 
Committee before him, the Governor no doubt honestly, but mis¬ 
takenly, thought that the whole, head and trunk of the insurance 
business of the State of New York rested in the three life insur¬ 
ance companies of the State, the three great companies, and that 
in respect to that he needed no information from any other source, 
because he had become the fountain of the source of knowledge 


740 


Proceedings in Senate. 


by reason of bis intimate and peculiar connection with it. And 
so this message based upon cause, upon a charge of neglect of 
duty, whose specifications are related to the life insurance com¬ 
panies, and nothing else is the thing to which he invites your 
attention. 

The statute under which this proceeding w’as taken never con¬ 
templated that this august tribunal in the exercise of its powers 
should merely register the will of the Executive. If it had so 
intended under the law then it would have vested in him the 
sole power of removal without the interposition of the Senate. 
It has left the Senate to be the body that should take the testi¬ 
mony upon the charge, and taking the testimony it should know 
whether or not the information upon which the Governor acted 
in making the recommendation was founded in fact, and 
was sufficient in force and gravity to authorize the adoption 
by the Senate of the recommendation. The initiative was with 
the Governor, the judicial act of weighing the testimony 
and of doing justice with the Senate, and the Governor so 
understood it wdien he penned his message and sent it to the 
Senate. ITe asks for the vote of no Senator here simply because 
he desires the removal of Hr. Kelsey. ITe has not asked that 
any Senator vote for his removal because he desires it. Oh, no! 
He asks that the Senators should vote for removal only if they, 
in their investigation, find that Mr. Kelsey w T as guilty of neglect 
of duty in his office, and that the specifications of the charge 
of neglect have been sustained by testimony. If he did not 
mean that then there was no occasion for sending this message 
, here, specifying cause. If the Governor did not mean that, then 
the message would have come before you barren of anything ex¬ 
cept the recommendation. Then the message would have said: 
“ I recommend to the Senate the removal of this officer, and I 
recommend the Senate to remove him because w T e two, the Gov¬ 
ernor and the Senate, acting together, have the power to remove 
him.” That w^as all that was necessary; and then if the two 
together saw fit to act they had the power under the law so to 
act. But the Governor plants himself upon no such cause as 
that; he investigated partially; he made a recommendation; and 
he now asks the Senate to remove, if they find that the charges 
are sustained, or if they find evidence here which justifies a 
removal. And if reason therefor does not exist in this testimony, 
then the Governor has not invited the Senate to remove this 
officer. 


Address of Mb. Hatch Before the Senate. ' 741 

^ hat is it then that is in this testimony which has been taken 
before the Jndiciary Committee ? We are charged with failing 
to execute the law in this language, The passage of laws will 
amount to nothing if they are not executed.” Does not that mean, 
did not the Governor intend to be understood as saying when he 
penned that, that the Armstrong Law had been adopted for the 
purpose of preventing the abuses which are recited in other parts 
of the message, and that it had been placed upon the statute 
books, and that it had not been executed ? That was the charge. 

How if we show that it has been executed, executed fully and 
completely, then may I not submit to the Senate in all fairness 
that that charge falls to the ground ? 

What was the Armstrong Law ? An investigation had been 
held in the city of Hew r York of insurance companies; Senator 
Armstrong now of this body, participating as the Chairman of 
that Investigating Committee, participating also in the drafting 
of this law, and according to the statement of the witnesses under 
oath before the Judiciary Committee, was practically responsible 
for section 94 of that law. This law, the amendment of 1906, 
so far as essential to any question adverted to in the message or 
with respect to the proof taken before the Judiciary Committee, 
shows that section 94 relates to the election of directors; section 
97 to the expenses of the company; section 101 to the standard 
policies, and the thirteen others that were subsequently adopted. 
Section 102 which creates discrimination in favor of outside 
companies as against our own insurance companies. 

Section 103 relates to the publicity section mentioned in the 
message. 

Those are the sections of the law. We are charged with having 
been guilty of violations of duty in failing to fulfill them; that is 
the charge. What is the proof ? — undisputed proof too. I in¬ 
vite any Senator who heard the testimony to point out where there 
was failure by the Superintendent to enforce the Insurance Law 
either in one section or all. 

Section 94 provided for the election of directors of these in¬ 
surance companies. What was its purpose ? Its purpose was to 
procure, if possible, the registration of the will of the policy¬ 
holders in the board of directors so that they might have voice 
in the management of these insurance companies. Does that 
section provide for anything else? If it does, I shall be very 
glad to have some Senator point it out. With all deference to 


742 


Proceedings in Senate, 


the distinguished gentlemen who drafted that provision, I am 
frank to say that under the stress of the actual enforcement of it, 
under the stress of its subjection to the test of the practical side 
of insurance, that it might have been. bettered and made more 
clear in expression. Under that law when Mr. Kelsey entered 
upon the discharge of his duty, he was confronted with the necessity 
of formulating some plan by which 900,000 voters in one com¬ 
pany and between 700,000 and 800,000 voters in another, might 
be registered ajid at that election have their votes counted. It was 
not an easy thing to do. It took the combined force of counsel for 
the insurance companies, of counsel for the International Policy¬ 
holders Association, which under later events seem to have delved 
quite deeply into the subject, it took the united force of the 
Attorney-General and the active force of the Superintendent of 
Insurance and his office force, to work out a plan and formulate 
a ballot that might be sent to the voter and be sufficiently plain. 
This ballot traveled over the face almost of the habitable globe. 
I think it became necessary and it was published in thirteen —- 

Mr. Ainsworth.—-Judge, nineteen. 

Judge Hatch.— (Continuing)—was published in nineteen 
different languages; finally, it dealt with people in every civilized 
country certainly on the face of the earth, and some that are 
characterized otherwise than civilized. 

It was desired that this ballot should be understood by every 
policyholder. Its preparation involved a contest between half 
a dozen lawyers representing the companies and the policyholders, 
and with them the Superintendent of Insurance went over every 
line and word that entered into that ballot; each line and word 
was the subject of scrutiny, investigation and argument. That is 
the testimony, and the fact is conceded. It matters not how the 
thing was gotten out, in every infinite detail. AYhat did happen 
was that the Superintendent being authorized or charged witKthe 
duty of issuing it, did issue it, did promulgate it, did send it out 
in accordance with the statute, and what was more, he made rulings 
with respect to it. The International Policyholders’ Committee 
said it was wrong, they took an appeal and they grouped together 
the objections in the appeal which they took, and applied to 
the Supreme Court for a mandamus to compel the Superintendent 
of Insurance to determine as they desired it to be determined; 
and when it came to be reviewed the Superintendent was sustained 
by the Supreme Court at Special Term. It was then taken to the 




Address of Mr. Hatch Before the Senate. 743 

Appellate Division and there affirmed. Here is the record of 
that case [producing record], which involved the question of the 
form t of the ballots. There is an opinion by the court that 
sustains the determination of the Superintendent of Insurance; 
pursuant thereto, the ballot was issued. There was something 
more, although not specially provided for in the law. It was re¬ 
quired, or the Superintendent of Insurance required it, that the 
ballots as they come in from the policyholders should be preserved. 
What did he do with respect to that ? He had every ballot de¬ 
livered to a custodian representing the insurance company and 
the Superintendent, and the two together took the ballots as they 
came in each day, deposited them in a box, to which each one 
had a key, but the box could not be opened save in the presence 
of both; thus he safeguarded the ballots of that election prior to 
the time w r hen they should be cast. According to the newspapers 
of the last few days it would have been infinitely better could 
Mr. Kelsey have had control of all the ballots rather than they 
should have been kept by somebody else with the subsequent 
charges of perjury and forgery now engaging the attention of the 
district attorney of the city and county of Hew York. So it was 
that the Superintendent safeguarded those ballots, and every one 
that came in on the day of election was opened and handed over 
to the inspectors of election. 

What more did he do? He caused inspectors of election to be 
selected, and by his own motion invited suggestions from all, and 
of his own motion as to those names submitted to him he had a 
personal scrutiny made of their character by men he employed for 
that purpose; and they reported to him, and to him alone. He 
settled the compensation and the number which should constitute 
the body. Some wanted fifty and some less. Some $200 a day 
and some $10 a day. He fixed the number of inspectors at five 
and the compensation at $35 per day. The Judiciary Committee 
had before it the men who conducted that election. The Mutual 
Insurance Company’s election has been carried through; the 
result of that election has been stated, and the expression of the 
policyholders has been given under that law as far as the law per¬ 
mitted it to be given. In the Hew York Life Insurance Company 
by reason of a different method and with more to do, they are 
still engaged in the process of reaching a conclusion; but in each 
of these companies the election has been conducted fairly as far 
as the will of the policyholders has found expression, and the 


744 


PROCEEDINGS IN SENATE. 


count has been registered honestly, and if there are any questions 
now remaining they are for the courts. So wherein or how, let 
me ask any Senator, was Mr. Kelsey derelict in his duty in re¬ 
spect to that particular section of the law? He has done all that 
the Governor could have done under that law, and I believe he 
has done it as well as any man could do it. Who of all of us 
could do it better ? 

I pass now to another section — section 97. We introduced 
in evidence before this Committee thirty-one different rulings 
with respect to matters raised in relation to the expenses of agents, 
and what they should charge, the purpose of that being to limit 
the cost of insurance so that the agent might not take all, so that 
the premiums might be lower, as their expenses were less. 

Section 97 had thirty-one rulings at the time of the hearing, 
and now, day by day, rulings are made under it. Has anybody 
at any time since the passage of that law heard a word of criti¬ 
cism of the administration and enforcement of it by this man ? 
Hot a syllable appears in this message nor any testimony given, 
save as it shows in the testimony given before the Committee 
the faithful performance of the obligation imposed by that law 
day by day. 

Section 97 has been enforced. 

I pass now to section 101, which is the next particular thing 
to which attention has been called. That provided for four stand¬ 
ard forms of life insurance policies that should be adopted in 
this State, and by the law they should constitute the terms upon 
which life insurance policies should be written, aside from those 
mentioned, which it was within the discretion of tbe Superin¬ 
tendent of Insurance to authorize. 

These he had to promulgate, by the terms of the statute, by 
the 1st day of October, 1906. They are there [indicating]. There 
are the forms [indicating] literally covered with interlineations 
in red ink and otherwise. Upon all those forms there has been 
engaged all of the skill and knowledge of the insurance world, 
and all that the Department of the State of Hew York possesses. 
Every word and line of each of these policies has been the sub¬ 
ject of scrutiny and consideration. There has been varying 
construction of language by lawyers, and all the arguments upon 
one side or the other have been presented to enforce particular 
views. There is scarcely a syllable — certainly not a paragraph 
— that has not been the subject of briefs and hearings of coun- 




Address of Mr. Hatch Before the Senate. 745 

sel by the Superintendent. Four policies were adopted. I have 
not time to go through them and tell you the details of that 
work. It is sufficient for me now to say that these four policies, 
as appears by the evidence, finally furnished and became the ul¬ 
timate judgment of the Superintendent of Insurance, and he pro¬ 
mulgated them as commanded by the statute. He did more. He 
sent those policies to the Chairman of the Armstrong Investigating 
Committee, and he examined them, and to this day no word of 
criticism has proceeded from his lips with respect to the discharge 
of duty by the Superintendent of Insurance in connection with 
that matter. 

The Superintendent of Insurance did more. He sent the four 
standard policies to Mr. Hughes, the lawyer that had appeared 
for the Armstrong Investigating Committee upon that occasion, 
and received from him an acknowledgment of the receipt of 
those four policies; and to this day, I challenge any man to the 
contrary, there has not fallen from his lips, either as a private 
citizen or as Governor of the State, any criticism of the Super¬ 
intendent of Insurance with respect to that matter, unless it 
can be found in the general phrase contained in his message. 

Is it reasonable to assume, in the absence of proof at least, that 
the two experts who appeared before that Committee, that over¬ 
looked and supervised this work, that had the opportunity to, and 
doubtless did inspect it after it was finished, if in any respect 
wrong, would not have provoked some word of protest from that 
source ? Hot a syllable — and I know, or at least I believe to the 
point of conviction, that the Senator who presided over the in¬ 
vestigation conducted of the life insurance companies, knows 
that this Superintendent of Insurance discharged his duty in 
/ connection with these matters to the last limit requiied of faithful 
devotion to duty. 

What more? Section 101 provides for the promulgation of 
certain other policies. Those four policies were gathered from 
some three hundred and odd other policies that floated around 
in this State, issued by various insurance companies. It (sec¬ 
tion 101) provided that the Superintendent might in his dis¬ 
cretion issue other policies under which the insurance companies 
might do business in this State. That required a notice to be 
given to the insurance companies, a hearing had, and a con¬ 
clusion reached by the 1st of January, 1907, and on the 1st of 
January, as.I recollect the provisions of the statute, the power 


/ 


74G PROCEEDINGS IN SENATE. 

of the Superintendent of Insurance to authorize those policies 
would cease. What did the Superintendent of Insurance do ? 
There were submitted to him over a hundred different policies 
from which to formulate the terms of these policies. He de¬ 
termined upon one line of policy, that he would not author¬ 
ize a policy whose purposes were embraced in any one of the 
four standard policies already adopted, but that they should re¬ 
late to matters of insurance which could not be done under any 
one of the four. There was an established proposition. He was 
anxious to fulfill this law to the letter, to fulfill the whole of 
it, so he went to the Mecca of Insurance Law, or at least a part of 
it, in Life Insurance Law; he went to Rochester, and he there 
engaged the services of Senator Armstrong to aid him, so that 
he might carry out the interpretation of that law to the letter. 
Senator Armstrong counseled with him. They went to the city of 
Hew York. They heard reputable and able counsel, the ablest 
that practiced at the Bar of Hew York. They listened to the 
arguments, and when they had finished, Senator Armstrong 
and Superintendent Kelsey and their associates considered the 
policies and the arguments, and they formulated the result. I 
submit that Senator Armstrong was the counsel for the Superin¬ 
tendent. If there was any fault in anything which was done the 
Senator was responsible for it, and not the Superintendent, be¬ 
cause it was his knowledge for which the Superintendent asked 
and which the Senator engaged to give. Would any one have the 
temerity to say that the Superintendent of * Insurance was not 
justified not only in consulting, but in following the advice of 
the Senator who is equipped in that regard and who has special 
knowledge of the subject? 

They adopted thirteen policies. They are promulgated. Has 
any human being outside of a life insurance company that wanted 
their particular policies, ever been heard in criticism of this mat¬ 
ter ? Jf there has been, it finds no place in the charge registered in 
this message. Ho place in any proof anywhere. Ho man’s lips, 
whether official or otherwise, have been opened against it or in 
criticism of it. That was the whole, practically' of section 101. 

I now pass to section 102. Section 102 as originally drafted 
by the Armstrong Insurance Committee, or the draughtsman of that 
law, had provided that the standard forms of policies and others 
to be issued should be obligatory upon insurance companies doing 
business in this State, and upon those organized in other States 


Address of Mb. Hatch Before the Senate. 747 


and doing business here; that is, there should be no discrimina¬ 
tion in favor of foreign insurance companies against our own. 
It so read; finally when the law was drafted and passed by this 
Senate, there was inserted the provision that these should be 
limited to domestic insurance companies. The Superintendent 
discovered this change in the law. The foreign insurance com¬ 
panies claimed the right to come in and write any form of in¬ 
surance. they chose. Home companies were protesting against 
such a construction of the law. The Superintendent of Insurance 
applied to the Attorney-General for his construction of it; and the 
Deputy Attorney-General who examined it, being anxious to reach 
a conclusion favorable to the home companies, gave an interpreta¬ 
tion of the law making it applicable as well to foreign companies 
as to domestic insurance companies. Senator Bulkley of Con¬ 
necticut and others came here with lawyers and said: “ We bring 
here insurance policies as merchandise. I claim under the con¬ 
struction of this law there is no inhibition of a foreign insurance 
company coming in here and writing any insurance it sees fit.” 
And they insisted in argument before the Attorney-General and 
the Superintendent of Insurance upon this construction, and the 
learned Attorney-General and the Superintendent were finally 
obliged to conclude that the argument was correct. There is no 
doubt about the proposition that this construction was sound, for 
by the insertion of the word “ domestic ” before insurance com¬ 
pany it operated as a word of limitation, and applied only to 
domestic companies; so from that day to this the foreign com¬ 
panies can come here and write any policy they choose, while our 
own companies are limited to four. But for that discrimination 
the message does not charge Mr, Kelsey. Bor that discrimination 
I do not understand that Mr. Kelsey has been accused. For that 
discrimination I do not as a fact understand that he is responsible. 
It was the fault of the law, and not the fault of the Superintend¬ 
ent. There is no limitation here in this charge that we did not 
enforce the law. It says all of it, or none of it, or if some of it 
it is not this section. 

Let me now pass to the next section, section 103. Let me read 
to the Senators the charge this message contains in connection with 
this: “ The passage of laws will amount to nothing if they are 
not executed. Provisions for publicity will not avail if the 
supervision of the State be feeble and inadequate.” 

There we are charged in this message with feeble and in- 


748 


Pkoceedings in Senate. 


adequate supervision, and that tlie publicity part of this law has 
not been enforced. The publicity part of the law is in section 103. 

It is a valuable section too. That section has engaged the atten¬ 
tion of actuarial societies, the meetings of superintendents- of 
departments of the whole insurance world for months, and it 
is proved here — I haven’t the time to go through the testimony 
but it is proved beyond peradventure that there w r as brought and 
placed before the Superintendent of Insurance the accumulative 
knowledge of every man having knowledge on this subject in this 
State and in other States. There were the results from Wis¬ 
consin; there were the results from Indiana; there were the re¬ 
sults from Massachusetts; there were the results of the entire 
insurance w T orld from all over the United States. 

This man, charged here with dereliction of duty and neglect in 
this respect, because the publicity statute was not enforced, finally % 
promulgated these statements here, [indicating], which in the 
insurance w 7 orld are accepted as the best statements known. - If the 
Senate could examine them, they would conclude that this man 
is a man of learning upon this subject; and I challenge anybody to 
say wherein the work could have been bettered. It w T as testified 
before the Committee that this information and the promulgation 
of this document has been followed by every insurance depart¬ 
ment throughout the United States. Is there any neglect of duty 
there? What is the result? The statement went into force and 
effect, I think, about the first of October. There w r as laid upon 
the desk of each member of the Legislature of this State a state¬ 
ment of the result at this legislative sitting. Its purpose was to lay 
bare before the world, or this part of the world where insurance 
legislation is formulated, a condition of the insurance companies 
— what were their assets, their expenditures; what was the cost 
of insurance; what disposition had been made of their moneys — 
in order that hereafter the public might know when fraud was 
being committed in order that they might suppress it or render 
it impracticable. These documents promulgated by this Insur-. 
ance Superintendent produced the results expected, and, as I 
said, there was laid before each Senator the course of the depart¬ 
mental business, a statement filed under the provisions in answer 
to the blank statement from the insurance company, showing 
their condition, and disclosing it as freely as if you visited the 
insurance companies’ offices and intelligently examined their 
books. Where then is there any basis for the charge that this 


/V 


Address of Mr. Hatch Before the Senate. 749 

man neglected liis duty in failing to fulfill the Insurance Law ? 
That is a singular subject to have found a place in that message. 

Hot a sentence of the law is charged by the Governor in terms 
as having been violated. I venture to say that no Senator here, 
whether he be for or against 'the Superintendent of Insurance 
upon this determination, will deny what I have said with respect 
to the enforcement of this provision of the statute; and if so, 
what becomes then of this charge ? Where does it land ? If 
the people of this State could take this testimony contained in 
this volume [referring to printed volume of testimony] and read 
it, do you suppose that they would consent to the removal of 
Mr. Kelsey ? It is the violent insistence of newspapers that they 
read and of which Mr. Kelsey is the victim. Woe is me when a 
'man’s rights are thus determined ! His mouth is shut; his mouth 
will be shut now so far as it finds expression in the public jour¬ 
nals of this proceeding, but the facts live; they are before this 
body for adjudication. The charge made against him is un¬ 
founded in fact and disproved by evidence, and he has established 
that he brought a faithfulness and devotion in the discharge of 
public obligation unsurpassed in the history of public service. 

I pass now to another point. It is in proof here, but the matter 
finds.no place in this message — that when Mr. Kelsey entered 
upon the discharge of his duties he had brought to his desk every 
letter that came into the Department. He had it brought to his 
desk for the purpose of acquainting himself with the routine busi¬ 
ness ; and for weeks and months every letter, no matter to what 
subject it related, passed under his hands and under his super¬ 
vision. Under this supervision he discovered that there was 
fraud being committed through business associations and the fra- 
ternals. These companies engaged in business with poor people 
that bring in small sums of money. There is a, statement here 
which shows that one of them advertises that they make their 
deposits in a bank capitalized at $100,000, in the Greenwich 
Savings Bank, which has deposits .of $580,000; I asked the 
Superintendent what the investigation of their accounts showed, 
and he said the investigation of their condition showed assets of 
$5.55, and their liabilities $7.10. Such institutions or business 
concerns, some of them fraternal and very good, some of them 
business, but very bad business. How no Insurance Superin¬ 
tendent down to the time of Mr. Kelsey had paid any attention 
to that business unless his attention was called to it by special 
complaint. 


750 


Peoceedings in Senate. 


Mr. Kelsey, finding these matters through his correspondence, 
began an investigation and twenty-four of these frauds have 
had their wings clipped and brought under the subjection of 
law, not under any specific provision of the statute, but under 
the' general powers conferred upon the Superintendent of 
Insurance. 

It is in proof here that he not only did that, but established 
a bureau in his Department for that particular purpose, and put 
Mr. Behan in charge; and they are engaged systematically in 
running down every one of these concerns; so that those people 
who are only able to carry small amounts of insurance, who are 
substantially helpless, have the protection not alone of the insur¬ 
ance for which they may pay, but also the protection of the law. 
Mr. Ivelsey has established this bureau and brought every one of 
these concerns under the eve of that bureau; and in a short time 
every one of them will be doing business according to law. Some¬ 
where in the message it says that we lack initiative and force. 
Who invited Mr. Kelsey to take up that business and establish 
this bureau in his Department? No one but his own knowledge 
and sense of obligation in the discharge of his duties. 

I pass to another thing. Not one of the predecessors of the 
present Superintendent ever made a report to the Legislature so 
that it reached the Legislature before the year following that in 
which the report was made. The general course' has been that 
the reports came out in August, and hence had become history 
before the meeting of the next Legislature. 

When Mr. Kelsey went into office he had different notions and 
different conceptions of duty with respect to that matter. He 
thought it would be wise to get up a report with respect to the 
business of his office for that year, so that it might be before the 
members of the Legislature while they were in session. 

I have in my hand a report which covers thirty-eight pages of 
printed matter, which takes up the Insurance Law, not only that 
drafted as a result of the Armstrong investigation, but it takes 
up every provision of the Insurance Law, relating to every 
subject which was deemed by Mr. Kelsey as essential and neces¬ 
sary for the faithful discharge of his duty and the fulfillment 
of it. That he printed. But before he printed it, before he 
submitted it to the Legislature, he took it to the Governor, and 
Governor Hughes read this pamphlet which I hold in my hand. 
It contains thirty-eight different specific propositions for amend- 


Address of Mr. Hatch Before the Senate. 751 

ment of the Insurance Law — how it could be improved; wherein 
it was faulty, and whether it needed amendment or not. He 
submitted that to Governor Hughes and Governor Hughes read 
it, had read it when, I am sorry to say, he penned the words 
that the Superintendent of Insurance lacked initiative and force. 
That was something that had never before been done; and if the 
members of the Legislature will read that report carefully they 
will find in it a statement in reference to every provision of the 
law, as to where the law was faulty and where it could be im¬ 
proved. Could you or I or the Governor- have done better 
with that situation? Could anybody? It is plain and simple, 
relating to the duties, covering the whole gamut of them, evincing 
a capacity beyond that of most men and indicating a devotion 
to duty which is very rare. Is not that an answer to the charge 
here that he lacked initiative and force? Is not that an answer 
to the charge that he neglected his duty? Is there any dispute 
about it ? Why the Governor commended it when he submitted 
it to him and said it was a “ very good memorandum.” I think 
it is too. It reads something like some of the Governor’s briefs 
which I have read, and which I thought were good. That is the 
Superintendent’s brief, that is the brief of this man with respect 
to life insurance, as shown by this record. 

I go now to another subject, and I must be brief about it. 
These matters of which we have spoken are matters which now 
adjust themselves. There is in this State to-day no cry of neces¬ 
sity nor any cry about any great burning question which confronts 
either life insurance or fire insurance. I venture to say that the 
Insurance Department can be taken up to-day and conducted over 
the ordinary route by any person acquainted with it. There are no 
burning questions now. They have mainly been settled. It is 
now the process of the law that needs settling. That is arrived 
at by consideration of the work, or of.the law; that is arrived at 
by practical conditions as they arise. But no such condition 
exists either in life or fire insurance to-day as existed when Mr. 
Kelsey entered upon the duties of that office. 

On the 1st day of May, 1906, just a year and a day^ago, 
Mr. Kelsey being the Comptroller of the State of Hew York, 
selected by the people of the-State of Hew York, who had confi¬ 
dence in his capacity — and a man who had suggested his lack 
of capacity up to that time would have been laughed at by the men 
here who know him to-day — he was Comptroller of the great 


752 


PROCEEDINGS IN SENATE, 


State of New York and discharged his duty well; and on the 1st 
day of May with the situation in the insurance world which had 
been brought about by the criticism of the conduct disclosed by 
the Armstrong Committee, with the situation produced in the 
fire insurance field by the overwhelming calamity of the San 
Francisco fire, and with the criticisms then being leveled upon 
the predecessor of Mr. Kelsey, Governor Higgins, with the knowl¬ 
edge bred of a business career, with the desire to place in that 
office a man of business in whom the people had confidence, 
whom he knew was capable, competent and honest, sent for Mr. 
Kelsey and told him that he wanted to appoint him Superinten¬ 
dent of Insurance. 

Mr Kelsey protested. lie did not want to be Superintendent 
of Insurance. His duties as Comptroller were congenial to him, 
and he realized the difficulties which confronted the man who 
should take up the office of Superintendent of Insurance, and he 
did not want it. But the Governor called attention to the fact 
that it was a public duty, that he OAved something to the public, and 
that he, the Governor, wanted a man to meet the situation, a 
man upon Avhom lie could rely to bring the Department to a con¬ 
dition of respectability and restore it once more to the confidence 
of the people. 

Mr. Kelsey told him that he believed any man avIio took the 
office at that time would court destruction. He Avas mindful of 
the criticisms and knew that nobody could discharge the duties 
of that office and escape criticism. But Governor Higgins over¬ 
ruled his pleas, and finally Otto Kelsey consented to accept the 
appointment to the office. 

One year ago this day this body now sitting under this arraign¬ 
ment, with Mr. Kelsey at its Bar, confirmed him without a dis¬ 
senting vote for the office of Superintendent of Insurance. 

Were Governor Higgins Governor of the State to-day this body 
Avould not be convened this morning for this purpose, nor Avould 
there be found in the public mind any necessity for its being 
convened for such a purpose. 

He entered upon the duties, of his office on the 17th of May, 
1906. On the 18th day of April, 1906, there had happened a 
great calamity at San Francisco, and a more disastrous fire than 
had ever visited this countrv, or, as testified by the insurance 
people who Avere brought here under compulsion of a subpoena, 
greater by far than those of Baltimore, Chicago, Boston and others. 


Address of Me. Hatch Before the Senate. 753 


\\ hat was the situation ? It was critical beyond measure. The 
conditions required most careful attention to detail. It required 
dealing with a subject-matter which related not alone to the pro¬ 
tection of the policyholder, but to the protection of the company 
and to the protection of business interests, and to the saving of 
this country from a business panic. That is not iny language; nor 
do I state it as strong; but in that record there, under the oath 
of the men called here from the city of Hew York, vou will find 
their statements stronger than I make it. 

Under those circumstances what did he do ?. That was a ques¬ 
tion not of administrative detail, but it required great business 
judgment and skill in its handling; it required an ability to com¬ 
prehend the situation. It required more, it required courage to 
do things. It required more, it required fortitude to endure 
things — to endure criticism upon one side and commendation 
upon the other; and this man — I say it with no degree of ex¬ 
travagance, because it is in the record and testified to by men 
whose integrity will not be questioned and whose judgment and 
ability to speak on the subject will not admit of question. I say 
this man rose to the occasion, rose to the situation in courage, 
capacity and judgment. 

The Governor’s first charge against Otto Kelsey is that he 
should have removed Hunter because he had neglected his duty 
at a prior time. The other specification is that he should have' 
removed Yanderpoel from his office, because he had written a 
false report at some time. The claim was made that he should 
have engaged in house-cleaning, and see if there w r as any clerk 
appointed at the instance of Andy Fields, and if so kick him 
* out. That is what the Governor said he should have done in the 
face of this great calamity which existed in California and which 
required to be met at once. Confessedly we did not do it. What 
we did was this: Mr. Kelsey went to Governor Higgins and 
talked about the situation, he outlined to him the conditions and 
how they must be met and the necessity for it; he told Governor 
Higgins that Hunter and Yanderpoel were still in the office. 
Mr. Kelsey then knew of the criticisms against Hunter and Yan¬ 
derpoel ; he knew what had occurred in the Armstrong Investiga¬ 
tion; he had read the report of the Armstrong Committee; he 
was mindful of the criticisms of these men; and he was also mind¬ 
ful of the fact that it was essential for him to grapple with the 
fire situation and protect the interests .of the stockholders as well 


754 


PROCEEDINGS IN SENATE. 


as the interests of the policyholders in these companies. So he 
talked with Governor Higgins, and after he had outlined the 
situation, Mr. Kelsey said to Governor Higgins that he thought 
these two men should be retained in office for the present at least 
until he got through with the fire situation. Governor Higgins 
thought so too; and singular enough it is for those two thoughts 
that operated to control Governor Higgins and Mr. Kelsey in the 
retention of those men at that time, they now operate as a reason 
why Kelsey should he removed from the office he holds. 

In the course of the consideration of that question it is given 
in proof here that Mr. Kelsey consulted with the Attorney-General 
with respect to the situation, as to what he should do in dealing 
with the fire companies. He also made arrangements by which he 
had Hunter and Vanderpoel in the city of Hew York daily and 
constantly going to all fire insurance presidents, and places where 
they could get information. These men obtained from fire insur¬ 
ance companies facts in relation to what was the condition of the 
insurance world as represented by its companies. The situation 
was this: If the losses published in the newspapers in connection 
with the disaster at San Francisco were true, then these companies 
were insolvent. If insolvent, then the Insurance Superintendent 
under the law was hound to call upon them to make good their 
deficiency. After he made an examination he would call upon 
- the companies to make good any deficiency, but not otherwise. 
As testified to by the witnesses who were called, if newspaper 
losses had been taken as a basis, it would undoubtedly have 
precipitated a panic, destroyed the fire insurance business and 
forced these insurance companies into the hands of a receiver. 
Hot alone would it have forced the insurance companies into the* 
hands of receivers, but as insurance credits are placed, running 
through the whole gamut of business, it would have affected all 
the business interests of this country, and would not have confined 
it to the fire insurance world, but would have extended to general 
business interests and would have caused a panic in addition to the 
other conditions then prevailing. 

Under those circumstances another condition arose. Strong 
companies, mindful of the condition then prevailing where weak 
companies could be forced to the w-all and out of business, made 
an attempt whereby some of the weaker ones could be wiped 
out and their business gathered in by the large companies, thus 
combining it all into one. It was for that purpose that the 


Address of Mr. Hatch Before the Senate. 755 

Superintendent of Insurance Avas sought to be influenced into 
actions which would have precipitated such a result. In this con¬ 
nection the Governor charges that in dealing with that situation 
Ave lacked capacity to deal Avith it. Under those circumstances 
there Avas Avritten under date of August 4, 1906, to the Executive 
Chamber a letter Avhich called attention to the \ T iolation by insur¬ 
ance companies of the provisions of the law, and the failure of 
the Superintendent of Insurance to bring the companies to ac¬ 
count. That was sent by Governor Higgins to the Superintendent 
of Insurance, and he Avrote a letter in answer thereto to the Go\ r er- 
nor; subsequently his correspondence came back Avith this letter — 
and I desire to read it to you so that you may see Avliat the situ¬ 
ation Avas and the claim made at that time, and the way in which 
Mr. Kelsey dealt Avith it. 

Ibis letter is dated August 9, 1906. It is addressed to the 
Hon. Frank W. Higgins, Executive Chamber, Albany, and is as 
follows: 

“ My Dear Governor.—-Your communication of the 7th in¬ 
stant, covering a letter dated KeAV York city, August 4th, appar¬ 
ently written in reply to Department letter of July 31st, ad¬ 
dressed yourself, regarding the first insurance situation and the 
financial condition of some of the companies folloAving the San 
Francisco conflagration, is re'ceUed. 

“ Reviewing this August 4th letter in detail and the sugges¬ 
tions therein contained, Ave Avould state that there is nothing in 
the Department letter of July 31st to indicate that it is our 
intention to accept as final the estimates made by various com¬ 
panies as carried in Department. circular of July 28th. This 
circular letter Avas based upon the sworn returns of the officers of 
the companies, presumably furnishing the best information in their 
possession as of June 30th. 

“ In our previous letter to you reference Avas made to the 
fact that some of the most conservatively managed corporations 
increased the amount of their liability, betAveen the dates of the 
Department circular of May 12th and that of the 28th ultimo. 
In our previous letter Ave stated that such increase was incident 
to more complete data in the possession of 'the companies and 
continued: 

- “‘It is possible, in fact it is probable, that some of the com¬ 
panies filing their sAvorn returns as of June 30th will he com¬ 
pelled, with the further information Avhich they will receive 
within the next ten weeks, to increase their loss figures.’ 



I 


75G PROCEEDINGS IN SENATE. 

“ It is more than probable that the Department will at some fu¬ 
ture date call upon the companies for another statement of 
their San Francisco losses. The value of such a statement, how¬ 
ever, will depend upon additional data which can only come into 
the possession of the companies after they have had sufficient 
time to determine the correctness of their estimates of salvage 
and reinsurance. The Department does not believe that under 
existing conditions it would be warranted in fixing the percent¬ 
age of salvage which may be recovered by any particular com¬ 
pany from the isolated experience of some other company. 

“ The statement under oath called for by this Department 
furnished»the public with the most reliable information obtain¬ 
able by the Department at the date of the last circular. We 
have not attempted to fix the losses of all companies by applying 
to each of those operating in this State the experience of a cer¬ 
tain few. The suawstion has been made that some of the com- 

co 

panies have unnecessarily hastened the adjustment of losses; have 
not carefully safeguarded their interests thereby, and have paid 
a certain percentage of claims which were fraudulent in theii 
character. The companies adopting this questionable, if not rep¬ 
rehensible, policy should not expect to have their action taken 
as a basis for that of companies more conscientiously managed. 
There would be gross injustice to vast business interests and an 
indisputable violation of law by the head of this Department, 
if, without awaiting accepted proofs or a decision of the courts, 
the totals of claims filed for losses in San Francisco were ac¬ 
knowledged as established liabilities and companies thereby 
placed under suspicion of insolvency were condemned offhand 
and prohibited from continuing in business in Hew York. A 
specific instance is the case of one of our smaller companies 
which has outstanding policies involving over $1,000,000 of in¬ 
surance'. Its officers inform us that loss claims for $200,000 in 
addition have been presented for adjustment in respect to which 
there is not a single record in the possession of the corporation, 
either at its home office or at its agency in San Francisco, indi¬ 
cating that the property in question was ever insured by the 
company. The Department is not prepared to hold at the pres¬ 
ent time that this is a liability against the corporation sufficient 
to close its doors. 

“ Many believe the present situation in fire insurance to be 
precarious, but it will not be improved by officious intermeddling. 


Address of Mr. Hatch Before the Senate. 757 

The supposed critical condition of many companies is due to an 
unparalleled calamity and not to the incompetency or misconduct 
of their officers. In such an emergency it does not seem unrea¬ 
sonable for a supervising authority to conserve rather than to 
destroy confidence. Precipitate and sensational action might 
prove disastrous to the insured, as well as to the insurers, while 
a rational and prudent course, closely watching every development 
of affairs, supplying information to the public as rapidly as 
received, and during a period obviously necessary for reaching 
in the courts or by other process a determination of the legal 
liabilities to be imposed upon companies, to follow a consistent 
and orderly method of examination and supervision as provided 
by law, commends itself to the Department as a wise and safe 
policy. Ho bankrupt concern will be protected, but insurance 
companies of good repute which have been and are in the con¬ 
trol of experienced men of high character will have the ordinary 
opportunity to establish their liabilities. before a legal tribunal, 
and will not be unfairly discriminated against pending such 
decision. 

“ To the suggestion of the writer that he knows of two com¬ 
panies which are in possession of facts as to salvages which 
should be called for by this Department and that we have been 
remiss in this particular, we can only state that if any companies 
ha'Ce such data we will be pleased to receive it, or will promptly 
ask for such information if given the addresses of those pos¬ 
sessing it. 

“ To the suggestion that Hew York State companies may not 
invest their funds in the stock of another insurance company in 
the same line of business, but that this Department has permitted 
other State and foreign companies licensed to transact business in 
Hew York, to own stock of other companies in the same line of 
business, we would advise that such has been the Department 
policy for a number of years, amply justified by the fact that the 
companies so licensed have always possessed then full authoiized 
capital and a large surplus after excluding from their assets the 
investments objected to. (See annual statements earned in the 
Department reports). Conditions are such, and ha\e been such 
for a number of years, that the large insurers in this State have 
been unable to secure sufficient fire protection from authorized 
companies. This fact is evidenced by the large volume of business 
secured by the special agents licensed under section 137 of the 


758 


PROCEEDINGS IN SENATE. 


Insurance Law. The Department has never held that an act of 
this State limiting investments of the character herein referred 
to must necessarily be applied to corporations of other States when 
such corporations’ financial.showings, eliminating the questionable 
assets as above indicated, were absolutely satisfactory. This is a 
question of- Department policy and the responsibility for such a 
ruling must he assumed by the Superintendent, and, notwithstand¬ 
ing the views of your correspondent, we are of the opinion that 
the ruling in this particular is for the best interests of the insuring 
public. 

“For a number of years companies having reinsurance agree¬ 
ments or treaties have made use of the underwriters’ plan de¬ 
scribed in your correspondent’s letter for writing joint policies. 
There has never arisen an occasion where the issuance of such 
policies has been detrimental to the interests of the insuring pub¬ 
lic. The transaction of business in this matter has been, to a 
certain extent, for the convenience of the companies and has 
always.been considered by the Department as better protecting 
the insured who receives a joint policy of two or more authorized 
companies and has an added protection to that which would be 
secured by a policy of but one company. It has never appeared 
that this plan has been made use of for the purpose of assuming 
excess lines of hazard. It is possible that when all data relating 
to the San Francisco conflagration is compiled it will he shown 
that this plan of joint underwriters’ policies is undesirable. If 
such is the result, it will then be ample time for the Department 
to act. We question whether your correspondent is in possession 
of sufficient data at this time to warrant an unqualified disap¬ 
proval of this practice. 

“ The fact exists that in California a disaster unprecedented in 
our history has occurred; that as a result all fire companies have 
a new experience which will necessitate additional precautions in 
future business. Departmental supervision, company .manage¬ 
ment and suggested action cannot by any possibility offset the 
results of such a disaster. In our judgment, conservatism on the 
part of the Department at this time — consideration for the in¬ 
terests of the companies and watchfulness on behalf of the policy¬ 
holders and the loss claimants — is decidedly preferable tQ an 
ostentatious display of over-zealous and unwarranted interference. 

“ It will be the duty of the Department to keep in such close 
touch with the companies as to determine that they are solvent. It 


Address of Mr. Hatch Before the Senate. 750 

will not be the duty of the'Department, to force the insolvency of 
any company, basing departmental examinations to show this con¬ 
dition upon estimated figures or upon the experience of others. 

“ Very respectfully yours, 

“ OTTO KELSEY, 

“ Superintendent” 

That was followed by another letter which went to Governor 
Higgins, and when he transmitted that letter to the Superintend¬ 
ent, Governor Higgins wrote this: 

u Hon. Otto Kelsey, Superintendent of Insurance, Albany, 
N. Y.: 

“ My Dear Superintendent.— Inclosed please find letter from 
our friend Moore, who continues to be in a critical frame of mind. 
I send it for your information, but do not believe a reply is neces¬ 
sary. I am, 

“ Yours sincerely, 

“ FRANK W. HIGGINS.” 

Any man w 7 ho could write that letter under those circumstan¬ 
ces and describe the insurance situation as it then existed showed 
ability, and exhibited skill not only for the wants and needs of 
his department, but capacity to meet conditions beyond those aris¬ 
ing out of Department routine. 

Xt is in proof here that that letter was finally published in the 
city of New York in the insurance journals, and the testimony of 
the witnesses brought here was that it had a steadying effect upon 
insurance circles, and from that time on the fire insurance situ¬ 
ation became settled because they knew then that they had a Su¬ 
perintendent to deal with who understood his business, who could 
not be swept off his feet, who fulfilled his duties, and while com¬ 
pelling them to observe the law looked out for the stockholder 
at the same time, one who could not be swept away by appeals to 
do wrong no matter from what source they came or how large and 
important a name was attached to the appeal. 

That w T as the situation. It w T as met honestly, intelligently, 
courageously. The losses from the fire situation w 7 ere larger than 
had ever been known in the prior history of the country. All of 
the losses were paid or are now in process of legitimate adjust¬ 
ment, and that without the loss of a single dollar of any policy- 



760 


Proceedings in Senate 


holder, with only one company placed in the hands of a receiver, 
with only three others that went out of business and reinsured in 
other companies; such is the testimony. He caused to be paid into 
the capital of these various companies the sum of over $80,000,- 
000; and Mr. Sheldon and Mr. Beddall and the other gentlemen 
here testified that he not only saved millions, but billions of dollars 
in credits throughout the country. 

It is in testimony that the moment this letter was written by the 
Superintendent, pledging himself to this course, that it had a 
steadying effect upon the business; and these insurance men testi¬ 
fied that the action of the Department furnished the cue for all of 
the other insurance departments in the different States; they fol¬ 
lowed the lead of Hew York under this policy promulgated by 
this man. 

What higher testimony could be brought in his favor or in an¬ 
swer to these charges that he lacked capacity or initiative to per¬ 
form these duties. The very facts proved more than the claim of 
Mr. Kelsey. The existence of the condition testified over¬ 
whelmingly, beyond anything that words could produce, no matter 
from whose lips they fell. The fact remains that in life insurance, 
in fire insurance, in every branch of industry which this Depart¬ 
ment touches there is perfect safety and security. The interests 
of every man and company are safeguarded, and the rights of all 
are protected as they have not been before. The laws which have 
been adopted hav£ been enforced, the integrity of the Department 
upheld and the honor of the State kept unsullied. The Super in¬ 
tended of Insurance is personally known to four-fifths of his 
triers. He has lived in the official life of Albany for fourteen 

t/ 

years. He was a member of the Legislature for eight years. 
He has been appointed Chairman of the Committee on Codes, 
Chairman of the Judiciary Committee, second upon the Com¬ 
mittee of Ways and Means, and for a great many years he was 
upon the Committee of Kules. Are men of no capacity appointed 
to these positions ? Are men of mediocrity picked out to lead 
the judicial life of the Legislature? Does the Legislature of 
the State of Hew York pick up men not qualified to administer 
ordinary affairs and assign them to membership on the Committee 
of Kules ? How long ago is it since this man was a respected 
confidant and adviser of the then Governor of this State and now 
the President of the United States ? notwithstanding words and 
utterances to the contrary, the man you are trying here to-day 


Address of Mr. Hatch Before the Senate. 761 

enjoys personally the respect, the confidence and the esteem of 
the President of the United States. Bor eight years he was in 
the Legislature, and six in other departments of the State govern¬ 
ment, and during that period no criticism of him has been heard 
and no one before urged lack of capacity or of failure to discharge 
his duty with fidelity. 

During the time he was Comptroller of the State of Hew York 
is there any criticism or charge against him or insinuation that 
he lacked capacity ? When was it that it was suddenly developed 
here that this man did not know enough to be Superintendent 
of Insurance ? When was it and why had he not been uncovered 
before? The fact that he had never been uncovered before, or 
charged with lack of capacity was that the ground never existed 
either before or now. The charge has been made by those who 
did not know him, who did not know his worth, or his ability 
or his modest, unostentatious life. lie has lived here, walked 
these streets and been in your official life for fourteen years. 
Those who knew him — even those who did not know him, do 
not now dare charge any failure of integrity in his private or 
official life or conduct. He has kept his paths in the official life 
of Albany pure. He has had the respect of ev§ry one of his asso¬ 
ciates and the approval of his conscience through it all. Ho man 
ever before called to a bar at any time, or in any history, has 
ever been found cleaner and purer than this man. 

What is it for which his removal is asked ? They say because 
he has been guilty of negligence in the discharge of duty. I ask 
you, Senators, when you come to vote with respect to what shall 
be the judgment of this body in relation to this man, that you 
shall recollect that not a single stain rests upon his character, that 
not a single law committed to his care but has been enforced, that 
not a single duty committed to him in the discharge of the duties 
and administration of the Department of Insurance in this State 
remains undone to this minute — not one. And when that is the 
fact, how can it be possible that in this day and age a man shall 
take the bare power into his hands and lay hold of that, and say, 
“ This is the office we wantand based on that cast upon this 
officer by a judgment, if adverse to him, a stain and a stigma 
which shall remain upon his character for all time. It shall not be 
until there shall have been a vote by the Senators that registers 
that judgment in this Chamber, that I shall believe that any such 
judgment shall be pronounced. 




762 


Proceedings in Senate. 


Senators, on behalf of Mr. Kelsey, the Superintendent of Insur¬ 
ance, for this opportunity for a hearing in his behalf, I return his 
and my own thanks. 

Senator Paines.— Mr. President, I move that the Senate stand 
in recess until 2 :30 o’clock. 

The President.— The question is on the motion of the Senator 
from the Forty-second. All in favor say Aye, contrary Ko. It is 
carried. 

The Senate will stand in recess until 2 :30 p. m. 


Afternoon Session, May 2, 1907. 

The Senate reconvened in session at 2:30 p. m. 

SUBJECT:—CONTINUATION OF RECOMMENDATION IN 

THE GOVERNOR’S MESSAGE OF FEBRUARY 20th IN 

RELATION TO THE SUPERINTENDENT OF INSURANCE. 

The President.— The question before the Senate is: Shall the 
Senate concur in the recommendation of the Governor for the 
removal of Otto Kelsey from the office of Superintendent of 
Insurance ? 

Senator ITinman.— Mi. President! 

The President.— The Senator from the Thirty-ninth. 

Senator Hinman.— I desirp to express to this Senate my views 
upon the question which has just been read by the President, 
but in doing so I shall not undertake, or take, the position of 
directing or instructing any member of this body as to how he 
shall vote upon that question. I also desire to make it plain that 
in whatever I may say and in whatever action I may take, I 
have nothing but the kindliest feeling for the Superintendent 
of Insurance of this State. I am not personally well acquainted 
with the present Superintendent, but I am satisfied entirely that 
the Superintendent is in all respects an honest, honorable, up¬ 
right, conscientious, clean man, and a man of ability. * I know 
that from statements that have been made to me for years con¬ 
cerning him by a man in whom I have absolute confidence, and 
by men who have known him in his private and in his official life. 
I also desire to have it understood that in whatever I may say 
here I do not represent or assume to represent the views of any 




Address of Senator Hinman. 


763 


person in any position. No one is responsible for, nor can any 
one be chargeable with anything I may say here. 

A\ e have listened this morning to a presentation of the so- 
called case of the Superintendent of Insurance, presented in an 
eloquent form and with considerable feeling. I was one of those 
who voted in Committee and on the floor of this body to permit 
the Superintendent of Insurance to be represented here and to 
have his case heard by the open Senate. I have taken a position 
on two or three occasions which has been represented as being in 
favor of the Superintendent of -Insurance and as against the 
position taken by the friends of the Executive. Mr. President, 
I desire to say here and now that my position at all times 
has been and still is that this proceeding is not a trial; it is not 
in the nature of a trial. It has had none of the elements of a 
trial, and under the statute and under the decisions there are 
no charges here, and it is not a hearing. Now, I do not think 
there is any question about that. 

Of course, it may be considered temerity on my part to assume 
a position in opposition to that taken by the learned counsel this 
morning, for he stated here, and I recognize his ability — he 
stated here that the Superintendent had the right to be heard 
by the full Senate; that at first he was denied the right to have 
the stenographer make a record of the case; that at first he was 
denied the right to swear witnesses; and that this was a case 
on charges. 

Now, then, let us get down out of the clouds where we were 
held suspended for tw T o hours this morning and see where we 
are and what this is, and what we are here for, and what we are 
doing. 

Mr. President, the Constitution of the State of New York 
provides, and I am discussing now the question as to whether 
this is a trial or a hearing — the Constitution provides in article 
Y, section 3: 

“ A Superintendent of Public Works shall be appointed by 
the Governor by and with the advice and consent of the Senate, 
and hold his office until the end of the term of the Governor 
by whom he was nominated, and until his successor is appointed 
and qualified.” He may be suspended or removed from office 
by the Governor whenever in his judgment the public interests 
shall so require; but in case of the removal of such Superintend¬ 
ent of Public Works from office the Governor shall file with the 


764 


Proceedings in Senate. 


Secretary of State a statement of the cause of such removal, and 
shall report such removal and the cause thereof to the Legisla¬ 
ture at its next session. 

The Constitution in that section clearly gives to the Governor 
of this State the power to remove a Superintendent of Public 
Works, to remove an officer having equal power and authority 
with the Superintendent of Insurance from office, not upon 
charges, not after a hearing, but for any cause which to the' 
Governor may he sufficient. 

How take section 4 of the' same article — article V. It 
provides: 

“A Superintendent of State Prisons shall he appointed by the 
Governor by and with the advice and consent of the Senate, and 
hold his office for five years unless sooner removed; he shall 
give security in such amount. Little farther down in the sec- 
tion, toward the end of the section it says on the question of 
removal: “ The Governor may remove the Superintendent for 
cause at any time, giving to him a copy of the charges against 
him and an opportunity to be heard in his defense/’ 

The framers of the Constitution have made, and there is made 
in this Constitution a distinction between those two offices and 
those two officers. In the case of the Superintendent of State 
Prisons his removal must he on charges, and for cause; and that 
Superintendent must have an opportunity to he heard in his de¬ 
fense because the law so states. 

Then in Article XI of the Constitution it is provided, sec¬ 
tion 6: 

“ The commissioned officers of the Xational Guard shall be 
commissioned by the Governor as Commander-in-Chief; and no 
commissioned officer shall he removed from office during the 

o 

term for which he shall have been appointed or elected, unless 
by the Senate on the recommendation of the Governor, stating 
the grounds on which such removal is recommended or by the 
sentence of a court-martial, or upon the findings of an examining 
board organized pursuant to law, or for the absence without leave 
for a period of six months or more.” 

There are officers appointed by the Governor, commissioned 
officers in the militia, and in that case the law requires that the 
grounds on which the removal is recommended shall be stated. 
Then is Article X, section 7, provision is made as follows for re¬ 
moval from office for misconduct: u Provision shall be made by 
law for the removal for misconduct or malversation in office of all 



* 


Address of Senator Hinman. 765 

officers, except judicial, whose powers and duties are not local or 
legislative and who shall be elected at general elections,"’ etc. 

The Constitution is silent as to the removal of the Superin¬ 
tendent of Insurance. I he office of Superintendent of Insurance 
is not a constitutional office, but the Legislature of this State has 
provided for the selection of a Superintendent of Insurance; the 
Legislature has created the Department and has created the office. 

Section 2 of the Insurance Law provides that there shall con¬ 
tinue to be a separate and distinct department charged with the 
execution of the laws relating to insurance, to be known as the 
Insurance Department, the chief officer of which shall he the 
Superintendent of Insurance, whose term of office shall be three 
years; who is to be appointed by the Governor by and with the 
advice and consent of the Senate. And then the Legislature has 
provided in the Public Officers Law the method of the removal of 
such officers. 

The first act I know of in reference to the removal of State 
officers passed by the Legislature was in 1841; that was amended 
in 1875, and again in 1892 there was a change—-the Legislature 
adopting the Public Officers Law, which was a revision of the 
statute made by the Statutory Revision Commission. 

Senator Cassidy.— Can the gentleman explain why the tenure 
of office was made three years ? 

Senator Hinman.— I can tell you what I suspect it w r as. I 
know what we have been doing in past Legislatures. Republican 
Legislatures extend terms of offices and officers in order that if 
the State goes Democratic their officers may hold office under the 
Democratic administration, and the Democrats do the same 
when they are in power. As a matter of fact what should have 
been done with this Superintendent of Insurance and those de¬ 
partmental officers was to make these offices terminate with the 
term of the Governor. * 

Take section 22 of the Public Officers Law and it will be seen 
that there are two classes of officers which the Legislature intended 
to provide for the removal of. The first class are those elected by 
the people, elective officers, and in that section it is expressly pro¬ 
vided that for such a removal a two-thirds vote of the Senate is 
required; and then it provides they may be removed by the Senate 
on the recommendation of the Governor for misconduct or mal¬ 
versation in office if two-thirds of the Senate concurs. Ho such 
removal shall be made unless the person to be removed shall have 
had a copy of the charges against him, and shall have had an 



766 


Proceedings in Senate. 


opportunity to be beard. Those relate to elective State officers, 
and in those cases the statute expressly provides that there must 
be charges formally made and served upon them and a hearing 
granted and then it takes a two-thirds vote to remove. 

In the same section, and another subdivision or paragraph, 
it is provided that an officer — and this is the only provision there 
is — it is the one in relation to this procedure, and it says: “An 
officer appointed by the Governor by and with the advice and con¬ 
sent of the Senate may be removed by the Senate upon the recom¬ 
mendation of the Governor.” That clearly shows that it was the 
intention of this Legislature of this State when it passed that 
subdivision of that section that appointive officers, appointed by 
the Governor by and with the advice and consent of the Senate, 
were removable by the Senate upon the recommendation of the 
Governor, without charges, without cause, without reason and with¬ 
out service of charges upon the officer, without a hearing or any¬ 
thing of the kind. There is no construction that can be placed 
on that or that section which indicates to any legal mind anything 
requiring charges, or specifications, or grounds or reasons or cause, 
or which provides for a trial or a hearing. 

The Senator from the Forty-sixth was absolutely within the law 
and absolutely correct in his position when he stated — I am not 
sure but that it was the Chairman of the Judiciarv Committee 

e/ 

•—when he stated that Mr. Kelsey and his counsel were given 
the privilege of being heard by the Committee, that they* were 
simply being given a privilege and not a right; and that is abso¬ 
lutely sound in my judgment. 

This question, this precise question has been considered by 
the courts in this State in a case decided in 1841 by the Court 
of Errors, Judge Cowen saying: “The defendant, a public 
officer appointed by the Governor with the consent of the Senate 
(that was the officer there) held his office subject to removal by 
the Senate; ” and he quotes from the statute, “ on the recom¬ 
mendation of the Governor.” The judge then proceeds: “I think 
the exercise of this power to recommend removals by the Gov¬ 
ernor need not be accompanied with the assignment of any cause. 
The power both in the Senate and the Governor is legally naked 
and absolute.” 

The question has been considered by the Court of Appeals. In 
1883 our Court of Appeals in the Whitlock case (92 JSL Y. 198), 
said as to that: “He has no vested right, and, therefore, the 



Address of Senator Hinman. 


767 


_ • I 

cases cited by the respondent and others of like character have no 
application. The office was created by the Legislature and they 
might abridge its terms by express words or specify an event 
upon the happening of which it should end.” 

And this office here was created by the Legislature; it is not 
a common-law office; it is not provided for in the Constitution, 
nor is it one in which or to which any incumbent has any vested 
right or property interest; and he proceeds: “ In this case the 
event specified by the Legislature is removal by the mayor.” 

Continuing, the court said: 

u The next position of the relators raises a more interesting 
general question: whether they were entitled to have notice or 
be heard before the final action of the mayor. At common law 
there could be no doubt as to this. Bagg’s case (11 Coke, 99), 
King v. Gaskin (8 Term Hep. 209), and many others cited by 
the learned counsel for the appellant, stand upon the principle 
that no one shall be condemned unheard, but this, too, when ap¬ 
plied to the term of office, is within the control of the Legislature, 
and as it gave the power to appoint, may also give the power to 
remove. (Const., art. 10, § 3; People ex rel. Sims v. Board of 
Fire Commissioners of the City of New York, 73 N. Y. 437.) 
In the act before us (Laws of 1881, § 1, chap. 559) the power 
of removal has been expressly conferred upon the mayor, to be 
exercised as to him shall seem meet. In People ex rel. The 
Mayor v. Nichols (79 N. Y. 582), cited by the appellant, the 
statute requires not only that cause for removal should exist, but 
also that the officer should have an - opportunity to be heard. 
The statute before us lacks both conditions. No opportunity 
to be heard is given, and it is enough if the mayor thinks there 
is sufficient cause. It may or may not exist, except in his imagi¬ 
nation, but his conclusion is final. The diligence of appellant’s 
counsel has found no case like it, and those cited by him do 
not apply. They require either the actual existence of cause,” 
or “ sufficient cause” for removal, and so by implication im¬ 
pose investigation before action, or by express language give a 
hearing to the accused member or official. ITeie the lem.oval 
is to be determined summarily, and is intrusted to the unre- . 
strained discretion of the mayor. Nor is this without a precedent. * 
Among other cases like power is given to the Governor over the 
Superintendent of Public Works, and to the latter over his as¬ 
sistant superintendents (Const, of Aew I ork, ait. •>, § o ). and to 


768 


Proceedings in Senate. 


the board of commissioners of the fire department of New York 
over certain subordinates (Laws of 1873, chap. 335, § 28). Un¬ 
der that statute it was held that the power of removal was to be 
exercised at pleasure, except in cases where there was an express 
limitation to a removal after notice and a hearing and for cause.” 

So I submit that under the reading of this statute and the de¬ 
cisions, this is not a trial; this is not a hearing, and whatever 
action this body may see fit to take casts no reflection upon the 
integrity or ability or honesty or uprightness of this official. 

Let us look at the situation and see what we are asked to 
do. The question as read by the presiding officer is: Shall the 
Senate concur in the recommendation of the Governor for the 
removal of Otto Kelsey from the office of Superintendent of 
Insurance ? 

This Senate had the absolute right and power to have concurred 
in that recommendation that came to us on the 20th of Febru¬ 
ary, 1907, without waiting one instant, and no one could say 
any right he had had been abused or forfeited. The present 
Superintendent of Insurance was appointed in May last year 
for a term of three years. Lie became at that moment, when 
he accepted the office, a servant of the people — nothing more, 
nothing less — the people’s official, hired and paid by them, and 
the term of the employment was three years, unless — and it was 
conditional, upon the condition that he might be removed by the 
Senate upon the recommendation of the Governor at any moment 
during that period of three years, without any cause or provo¬ 
cation. His employment was subject to termination at any 
moment. 

There can be no doubt about that. 

Now, the question conies here: Should this Senate, represent¬ 
ing the .people of this State, concur in that recommendation? 
I was sorry to hear one of the statements made by counsel for 
Mr. Kelsey; he belittled himself and weakened his case when 
he made the statement, because it was absolutely unjustified, in 
my judgment. He said the Executive had reached out with 
power and proposed to put this man out of office, because “we 
want this office.” Now, is there anybody around this circle, is 
there any Republican member of this body who believes that to 
be true? Do you believe that the Executive of this State, when 
he penned that message,, was playing politics with that position? 
I believe the Executive of this State is an absolutelv clean, honest, 

V / 7 



Address of Senator IIinman. 


769 


upright, fearless man, and that there never has been a moment 
since he went into that Executive Chamber up to the present time 
that he has played politics with that office, 

I resent the insinuation, which has been made here, that Charles 
E. Hughes, sworn as he is to perform his duty, is seeking to re¬ 
move this officer for the sake of getting that office for some one 
he desires to have it for political reasons! 

What is the situation? What about this message? The 
Executive of this State on February 20, 1907, sent a communica¬ 
tion to the Senate in these words: kk I recommend the removal 
of Otto Kelsey from the office of Superintendent of Insurance. 
With respect to life insurance Hew York is easily the most im¬ 
portant jurisdiction in the United States, if not in the world ” — 
that is true, isn’t it ? — kk and the vast interests involved impera¬ 
tively require, and it should be a point of honor for the State 
to maintain a fearless and efficient administration of its super¬ 
vising department, commanding the confidence of the people.” 
That is true, isn’t it ? Absolutely true. There is no department 
in the State of New York that comes so close to and so vitally 
affects the interests of the people of the State as does the Depart¬ 
ment of Insurance; and it is of the highest importance that that 
Department should be so conducted, not only that the people 
of this State should have confidence in the Department, but that 
absolute justice should be done by the various policyholders in 
the various life insurance companies. 

What does he say: “ Undoubtedly the w r ork of the Depart¬ 
ment has been onerous and has required a large expenditure of 
time and thought. Nor do I seek to impugn.Mr. Kelsey’s in¬ 
tegrity'; ” and then, “It is my desire that the administration of 
the Insurance Department shall be worthy of the State of New 
York and that the reputation of its administration should be re¬ 
deemed;” and that is the desire of every good citizen in this 
State. 

Then he continues: “ With the unparalleled size and import¬ 
ance of the interests committed to its care it should represent the 
highest degree of administrative efficiency. There should be no 
taint of past scandal upon any person connected with it. For the 
sake not only of the policyholders but of all those in any way con¬ 
nected with the important business of insurance it should be above 
reproach.” True: absolutely true. Then he says, “I have been 
compelled with regret to reach the conclusion that Mr. Kelsey 

P" , 25 . ; ~ . 



no 


Proceedings in Senate. 


is not the man to have charge of this Department.” Do you doubt 
it ? Do you doubt that he felt that way when he penned that mes¬ 
sage ? There is not the slightest question about it. 

What was the situation: The people of this State, of this 
nation, have seen a government that was founded to be a govern¬ 
ment by the people become first a government by party and then 
a government of party by machines; and they have seen, and have 
grown uneasy in seeing it. Bad matters grow worse. The time 
came when an investigation was held and the rottenness of some 
insurance companies was uncovered. The present Executive had 
much to do with that, and as a recompense and because of it 
and the acts he did and the part he took in that investigation in 
uncovering that rottenness, the people of this State regardless of 
“ machines ” and of organizations nominated that inquisitor as 
Governor of this State. And he was elected. 

Elected, why ? Because the people of this State demanded a 
change. He was elected because the people of this State had con¬ 
fidence in him. It was an issue of men and not of measures; 
men, and not principles. It was. a definitely fought campaign, 
differently fought from any that had been seen here, and as a 
result of it he came here as the elected representative of the people 
of the State charged with a sacred duty. In that campaign he 
made certain promises and declarations and the people of this 
State heard them made, and saw him when he made them and 
they knew, looking into his face when he made them, that he 
w r ould make good if given the opportunity. 

He came into office, and being familiar with the insurance 
affairs of the State and having his own views and ideas .about 
them, he desired to have the Department of Insurance under the 
management of some man whom he should select ; and he did 
what any man would have done under the circumstances: He 
asked the present Superintendent of Insurance to resign. The 
present Superintendent of Insurance did not do so. In that he 
made a mistake. 

/ y. 

The Governor did not ask for his resignation upon'the ground 
that he was guilty of any wrongdoing or malfeasance; he did not 
ask for his resignation because he wanted to play politics with 
that Department. 

It is stated here that Otto Kelsey is a gentleman; that he is 
modest, kindly and courteous. That is true. That is true, from 
what everybody says of him, and I do not question it. But with 



Address of Senator Hinman. 


771 


% 


the condition as it existed in that Department and in insurance 
circles in the city of New York, Charles E. Hughes wanted a man 
in that office with stogy boots and brass knuckles, a man who 
would take the insurance companies by the neck with a strong 
hand and see, not only that they lived up to the letter but to the 
spirit of the law, and that the policyholders throughout this 
whole State and land should get what they are entitled to get 
under the law and their contracts. That is what lie wanted; and 
he had a right to have it. He was not casting any reflection upon 
Otto Kelsey when he asked it. Mr. Kelsey had no vested right 
in the office. It was no reflection upon him that his resignation 
should be asked. I understand that certain officers of the State 
tendered their resignations voluntarily at the time when Governor 
Hughes came into office. Mr. Kelsey did not do it. The Gov¬ 
ernor asked for his resignation and he didn’t get it. Then he 

says to this Senate, “ I recommend his removal; ” and he is ask- 

/ _ _ 

ing this Senate — I will not say that—I do not take any stock in 
the declarations that the Governor of this State is appealing to the 
people. He is not appealing to the people or to this Legislature; 
he is standing with both of his feet on the earth and he is telling 
the people what he stands for. He is doing his duty as he sees 
it. He is carrying out or attempting to carry out the promises 
he made. He is not appealing to or asking any one to assist 
him. He is letting the people know what the circumstances are. 
The responsibility is off his shoulders. It is on ours. We are re¬ 
sponsible to the people of the State of New York for what we 
do here. 

This question is bigger than any one man. This question is 
bigger than any one party. This is a question that concerns all the 
people. It concerns all parties; it concerns all the members of 
all the parties; and I tell you that any party which refuses to 
come up to' this situation and do its duty, and the members of a 
party who decline or evade or fail or refuse to come up to the 
situation and to measure up to the demand made upon them 
to-day, will hear from it in the future. There are no two ways 
about it, nor any escape from it; and what I say now I say with 
sorrow, because I do not want to do anything that will in any 
way cast a reflection upon Otto Kelsey, because I say that a man 
who has remained in public office as long as he has and has re¬ 
mained honest is entitled to all credit. There is no doubt about 
that, and I want to record my hearty appreciation of such a man 



772 


PROCEEDINGS IN SENATE. 


as that. But the Governor feels, and I believe he voices to-day the 
sentiments of the people, that Mr. Kelsey is not forcible enough 
for that situation. I believe the Governor honestly thinks that 
what Mr. Kelsey should have done, and what any 'Superinten¬ 
dent of Insurance should have done under the circumstances 
developed by the situation, was to have taken hold with a strong 
hand and cleaned house, no matter what earthquakes occurred 
somewhere else or what devastations occurred by fire. That is 
what the people desire. That is what the people are going to get 
before they get through. They have stood this hocus-pocus and 
this double dealing, and these alignments between wealthy cor¬ 
porations and politicians about as long as they are going to. 

We received an indication last year of what the sentiments 
of the people are. The danger is that the pendulum which has 
been swinging one Avay for years will swing too far in the other 
direction; and unless we meet the proposition, unless we meet the 
situation, unless affairs are managed in a different way from that 
in which they have been managed in the past we are bound to 
have trouble in the future, and it will be serious. 

It may be said or claimed that a dangerous precedent is 
being established by this proceeding for this Superintendent’s re¬ 
moval. Well, what is the precedent that will be established ? The 
precedent is that when the people of this State regardless of party 
issues, put an honest, an earnest, upright, capable man in the 
Executive office of this State, and when such a man is entitled to 
the confidence of the people, and he says that he desires a depart¬ 
ment of the State placed under the management and control 
of some man whom he selects and then asks this Senate to grant 
its permission, it will be granted. That is all we are asked to do. 
We are not asked and we do not have to concur in the message 
-of the Governor, we are not asked to vote or pass a vote of con¬ 
demnation upon any single act of Otto Kelsey during his life; but 
we are asked to concur in the recommendation that Mr. Kelsey 
be removed as Superintendent. 

It is true that in this message there are statements made 
which reflect upon the force and initiative of the Superintend¬ 
ent. Evidence was taken on this question because a 
majority of that Committee believed that under the circum¬ 
stances Otto Kelsey should be given every possible opportunity of 
placing before the people of this State anything and everything 
he saw fit in order to put himself right with the people as far as 


Address of 'Senator MoCarren. ■ 773 

his integrity and ability were concerned; and I was in favor of 
doing that; but I am not going to take up the question of the evi¬ 
dence given before this Committee. That evidence was ex parie, 
taken ex parte, and there is no question raised by me, and I pre¬ 
sume there is none raised by any one who knows Mr. Kelsey as 
to the absolute truthfulness of every word testified to by Mr. 
Kelsey. Not the slightest. But taking it all in all, the manage¬ 
ment of that Department, the Governor felt, evidently when he 
wrote that message and asked for the resignation, that a more 
forcible man, one with less modesty and kindliness, should be in 
that office at this time; and he asked us to concur in that 
recommendation. 

This question should not be made a political question. It should 
not be made a political question here, but on the other hand I say 
this: I sav that as to the members on this side of the chamber, 
when a Republican Governor of the class and of the character and 
standard of the one we have now, asks us for what he is asking 
here, we owe it to ourselves, we owe it to him and we owe it to the 
people of this State to respond to that request. 

I am a little suspicious that, politics are being played when I 
see the line-up as published in the newspapers, what they call the 
line-up of the whole Senate. How accurate that may be I do not 
know; but if it is accurate and we see on one side of the chamber 
the members of the other party line-up in large majority against 
the proposition, it looks a little suspicious and a little dangerous 
to a man looking at it from this side of the chamber. 

Now, Mr. President, I shall not cast any criticism of any 
kind upon any person who votes against this resolution. There 
are members of this body who are just as sincere, who are just as 
good citizens, just as respectable men and earnest men and honest 
men as can be found in the State of New York, who are friends 
of Otto Kelsey, who have known him for years and been associated 
with him, and I would not if I could cast the slightest reflection 
upon any action they may take. 

I have simply stated my judgment of the situation and am con¬ 
tent therewith. 

Senator McCarren.— Mr. President, I have listened with a 
great deal of attention to the Senator from the Thirty-ninth and 
I fail to find any reason advanced by him in favor of the proposi- 
tion to concur in the recommendation of the Governor. 

The Senator from the Thirty-ninth referred to several statutes 


774 * 


Proceedings in Senate. 


bearing upon the question of the removal of public officials, and 
he called particular attention to the fact that the Governor can 
remove the Superintendent of State Prisons, and he can remove 
the Superintendent of Public Works, by simply notifying the 
respective officials of the charges preferred. And he can remove 
other public officers. We all know he can remove a sheriff, and I 
think a great many of us are familiar with the action of Governor 
Odell in removing a sheriff in Kings c'ounty. 

Now the Senator from the Thirty-ninth has perforce called 
attention to the inconsistency of his attitude. He would have 
you believe, if I closely follow his line of reasoning, that because 
the Public Officers Act permits the Governor, forsooth, to remove 
a public official that he should be permitted to remove the Super¬ 
intendent of Insurance; and in the same, breath the Senator from 
the Thirty-ninth says there is no department of our State govern¬ 
ment so close to the people as the Department of Insurance. 

Now if he cannot see the absurdity of that position it would be 
futile for me to attempt to point it out to him. Why did the 
Legislature provide that before a Superintendent of Insurance 
should be removed the consent of the Senate must be obtained ? 
And why did the statute provide that before a Superintendent 
could be appointed the advice and consent of the Senate must be 
obtained ? Evidently the framers of that statute had in their minds 
the necessity for providing that a Governor should not at will 
remove a Superintendent of Insurance. 

Now it is true that while the Public Officers Act provides that 
the Governor must file charges and give the officials charged an 
opportunity* to be heard, we do know that the Governor can re¬ 
move a public officer if he does not like the color of his moustache. 
Now there can be no gainsaying that. It is a mere matter of form. 
Any Governor can say to the sheriff of any county in the State, 
“ I don’t like the color of your derby hat; you appear before me 
in the Executive Chamber to-morrow, and I will tell you that I 
don’t like the color of your hat, and you will be removed.” That 
is all right. But before a Governor can remove the Superintendent 
of Insurance he must have the consent of the Senate. 

But the Senator from the Thirty-ninth argued to-day, and 
has argued in Committee, that Superintendent Kelsey was not 
on trial. Well, if he is not on trial, on what is he? The law 
provides that the members of the respective branches of the Leg¬ 
islature are judges of the qualifications of their own members, 


Addbess of Senatob McCakbeit. 


775 


and that each house has in itself the inherent right to expel 
any member of that branch of the Legislature. How, for in¬ 
stance, if some Senator to-morrow morning rises in his seat and 
piesents a request for the removal of the Senator from the Thirty- 
ninth, would the Senator from the Thirty-ninth feel that jus¬ 
tice was being dealt out to him if the Senate immediately took 
a vote on the question of his removal, and voted aye or no on 
the proposition? or would, he feel he was' being fairly dealt 
with if the Senate voted to remove him. 

I have no interest at all in the question of, the retention or 
removal of Otto Kelsey outside of my disposition to give him 
a fair trial and to treat him as I would like to be treated myself, 
and as I believe the Senator from the Thirty-ninth would like to 
have himself treated. 

Otto Kelsey has had an honorable record in official life in our 
State. He has been a member of the Legislature, and every 
man of all parties that has served with him will testify to the 
fact that he is and has been one of the most conscientious and 
upright public officials and members of the Legislature that ever 
served the State of Hew York. 

If that be so then have we a right to ruthlessly cast upon him 
a reflection that he will bear to the day he goes to his grave? 
Haven’t we a right to give some consideration to the honorable 
record he made in the Legislature and in the office of Comptrol¬ 
ler of the State of Hew York, and in other official capacities, and 
to consider the question of his honesty, his integrity and his 
capability ? 

Originally the requirements were, under our form of govern¬ 
ment, and I state it briefly: Is the man honest ? Is he capable ? 
Is he faithful to the Constitution ? I think no man will deny 
that Otto Kelsey meets these three requirements. 

We might as well be plain about this matter and call things 
by their right name. If there is any reason in the world for 
voting for the removal of Otto Kelsey it is because we believe 
what the Governor has said. What has the Governor said ? The 
Governor has said that Otto Kelsey is inefficient; that he does 
not possess virility sufficient to manage the Department of In¬ 
surance of this State. There he rests content. How, I either 
believe the Governor or I do not believe him. If I believe the 
Governor I give my reasons for believing him; if I do not be¬ 
lieve him I give my reasons for my disbelief. I assume I had 


776 


PROCEEDINGS IN SENATE. 


as much information as the ordinary Senator about the capabili¬ 
ties and the equipment of Superintendent Kelsey; and I believe 
I had as much information about the routine work of the De¬ 
partment of Insurance; and I believe* I knew as much about the 
administration of Mr. Kelsey since he has been in that office 
as the ordinary Senator; and I say on my honor and my con¬ 
science that I could not point to a single incident in his life 
or in the administration of his Department that would permit 
me to vote for his removal except upon the theory that I am a 
craven and a coward. 

If you proceed on the theory that the Governor has the right 
to forthwith remove the Superintendent of Insurance, then the 
contention of those who believe he should be removed is right; 
hut I do not believe the Governor has any right to forthwith re¬ 
move the Superintendent of Insurance because the statute gives 
to the Senate the right to participate, in fact requires that it 
must consent to that proposition. 

Now, coming hack to the question of the infallibility of the 
Governor, if you please, and as to whether the Governor monopo¬ 
lizes all the information about insurance matters in this State, 
let us see what that amounts to, and consider the question from 
that standpoint. Now, I want to say, and I do say it, without 
fear of contradiction, and at the peril of being held up to-mor¬ 
row in the press as the representative of the corporations and 
the insurance combination, that to-day in the State of New York 
the insurance business is absolutely a corpse; and I want to say, 
in line with what the counsel for Mr. Kelsey referred to to-day 
in his eloquent address that there is no burning question before 
the people of the State of New York on the subject of insur¬ 
ance. We are not in the “ burning days;” we are in the ember 
days, so to speak; there is nothing left hut a pile of ashes. The 
carrying out of the provisions of the present 'Insurance Law is 
going to put the State of New York in a position wffiere the 
amount of insurance business and the volume of trade incidental 
to the corporations engaged in that business never will be re¬ 
stored, whatever we may accomplish. In the matter of the so- 
called reform legislation we have driven from us first a great 
volume of insurance business that was formerly transacted in 
this State; we have circumscribed the large companies to a 
business annually of $150,000,000, $o that in any one of the three 
great companies, the New York Life, the Equitable, or the Mu- 


Address of 'Senator MoCarren. 777 

tualj if in the month of September it is found the volume of 
iheir business has reached the $140,000,000 mark, they must 
then prepare to reject any business that comes to them that would 
exceed the $150,000,000 mark. What was the reason then for the 
passage of the Insurance Law ? What reasoning was employed 
that made that the law ( It was simply because it was contended 
that it was a dangerous thing to permit a corporation to have 
the handling and the application of so much money. 

iSTow, the Northwestern Insurance Company can come into the 
State of New York and do a billion dollars worth of business, 
if you please. There is no inhibition, and there is no law we 
can pass to prevent the outside insurance companies doing business 
in the State of new York, and thereby decreasing the business of 
the corporations which do business under our charters and our 
statutes. 

now, if the insurance companies are transacting a legitimate 
business they should be permitted to transact all the business 
they can do; and I might proceed along the lines of the argu¬ 
ment to show the indefensibility of the passage of many of the 
insurance sections in that Insurance Law, simply for the pur¬ 
pose of calling attention to the fact that I do not believe Otto 
Kelsey would have made the mistake which has been made in the 
Insurance Law. 

I regret the allusion made by the Senator from the Thirty- 
ninth to the fact that the Democrats are going to vote for the re¬ 
tention of Mr. Kelsey. I deplore the attempt he evidently has 
made to arouse party spirit. I have approached this question 
and dealt with it since it came before this Senate with a very 
frank and untrammeled mind. I want to say that I have care¬ 
fully listened to all the testimony adduced before the Judiciary 
Committee and watched the attitude and the spirit of the men 
who were giving, of course, ex parte testimony; and on their 
testimony alone I am obliged to say I could not believe a man 
could have been selected in the State of Kew York who could 
perform the duties of Superintendent of Insurance better than 
Otto Kelsey — not excepting the Governor of the State. 

Kow, if we are not to consider the testimony adduced as to 
the originality and the force and the extraordinary attention given 
by Mr. Kelsey to the duties of his office, then I say we are unfit 
to discharge the duties imposed upon us. 

I want to say, Mr. President, that I am not here as an autom- 



V 


778 Proceedings in Senate. . 

aton. I ajn not here to obey the order or the wish or the 
behest of the Governor, even if he were a Democratic Governor. 
If my father were the Governor of this State, and he should 
request that I vote for the removal of Otto Kelsey, when I con¬ 
sidered the case I would, if I were the only man in the Senate, 
refuse to comply with the request, because if I did comply I 
would thereafter have no respect for myself; I would feel that 
I was doing to an honest, upright, capable public official an irre¬ 
parable injury. 

A man who occupies the dignified and exalted position of Sena¬ 
tor of the State of New York should be a man capable of exer¬ 
cising his own judgment; he should be free from influences, 
whether political or social, that would compel him to brand a 
man who is his equal, in a manner which would reflect dishonor 
upon him for the rest of his life. That is a very solemn and 
momentous question to be decided, and it is one that bears on 
the character of the Superintendent of Insurance as long as he 
lives. Por these reasons, Mr. President, I want to say that I 
believe every Senator who will pass judgment on Otto Kelsey 
to-day should do so from the standpoint of the merits of the 
question-—not as to whether President Roosevelt has indicated 
whether or not Governor Hughes should be sustained; not that 
he should feel that as a Senator he will be one and a half years 
yet in official life with the Governor, but solely upon the merits 
of the case. 

I have been told several times since this message came here 
that if I wanted to rise to the opportunity presented to me, I, as 
a Democrat, should sustain the opinion and recommendation of 
the Governor; and on every occasion when that was said to me 
I said to the man who told me of it: “ Why should I do it ? ” 
and he said, “ Well, we believe the Governor has the ear of the 
people and will be supported by the people. And on one or 
two occasions I asked these men if they knew Mr. Kelsey, and 
their reply was, “ No; we do not know Mr. Kelsey.” I asked 
them if they knew anything about the merits of the question. 
No; they did not; and their only reason for urging me to vote 
for the removal of Mr. Kelsey was that the Governor was in the 
limelight. 

Now, Mr. President, I want to say, in all seriousness, that 
the Senator moved by influences of that kind is a coward, and is 
unfit to sit in the Senate of the State of New York. 


I 


Address of Senator Hooker. 779 

Mr. Hooker. Io my mind tlie action of this body in regard to' 
the removal of the Superintendent of Insurance should be purely 

a matter for the judgment and the conscience of each individual 
Senator. 

M e are sitting here to-day as a jury to act upon an indictment 
which accuses Otto Kelsey of being incompetent, neglectful and 
lacking in force and initiative. It is for each Senator to say 
whether in his opinion the facts presented show that this is the 
case. 

The people who elect us have the right to expect and demand 
that each of us act according to our judgment and our oaths of 
office. 

By a particular combination of circumstances there are to-day 
two men who in the estimation of the people of the State of New 
York are standing out for the rights of the people, who are strong, 
fearless men, who cannot be swerved from their ideas of right or 
wrong by question of policy nor by any attempts of other parties 
to sway and bias their judgment. These men are Theodore Roose¬ 
velt and Charles E. Hughes. It is to me inconceivable that either 
of these men sitting here as we are, as a jury, to pass iipon the 
fitness of a man as Superintendent of Insurance would be swayed, 
dominated or changed from his course because the other differed 
from him in opinion. 

Were this the situation I can fancy that either of them would 
flount the sole argument that the Governor wants this or the Presi¬ 
dent wants this, and if you don’t do what he wants you are an 
enemy of the people, for each believes, and truly so, that he could 
appeal to the people as to his honesty and integrity. 

Yet this is the situation in which each member of the Senate 
finds himself, and there are members to-day who will vote not as 
they believe, but because they fear that they will be accused of 
not standing by the Governor. 

To me this is one of the most dangerous doctrines or dogmas 
that could be promulgated by any one. It is more dangerous to 
our Republic than all the inroads made upon the Legislature by 
corporations. It is the beginning of a dictatorial power which 
would wipe out all representative government. If the entire 
Legislature is to be the rubber stamp which stamps “ approved” 
upon the ideas of the Governor, wdiat earthly use is its convening. 
The Governor himself sees this, when he appeals to the people, he 
reiterates that it is not for him to coerce the Legislature, that his 


780 


Proceedings in Senate. 


duty is only to recommend and then after this body has done its 
duty to approve or disapprove, and yet this vote will be analyzed 
and heralded and censured or approved as standing by the 
Governor. 

No one attempts for a minute to argue upon the proposition 
whether Otto Kelsey has made good, but it is hurled at us as an 
answer to the question “ Dare you oppose the Governor?’ 

Oppose the Governor, fight him, because our judgment does not 
agree with his upon this particular question. Is he, then, infal¬ 
lible? Are his opinions like those handed down on old Mt. Sinai ? 
Does he represent all the honesty, integrity, courage and brains 
in the State of New York? I do not believe that a man, such as 
he has shown himself to be, can be suffering from such a case of 
exaggerated ego that he believes it, or that he will consider that a 
man who differs with him is therefore a crook or an imbecile. 

I think rather that he is broad enough to give credit for an 
honest difference of opinion, that he may be as ready to concede 
to others the same rights that he arrogates in himself. That the 
clamor comes from ill-advised friends rather than himself, but if 
it is not so, if he considers that the man who dares to differ is 
thereafter to be classed as an enemy, then I for one must take my 
medicine, as I cannot and will not waive my own judgment, 
become one of those who bend the pregnant knee to royalty and 
vociferously exclaim “ The king can do no wrong.” 

Senator White.— Mr. President, on the second day of May, 
1906, Prank W. Higgins, the late Governor of the State, sent to 
the Senate the name of Otto Kelsey for Superintendent of In¬ 
surance— just one year ago to-day. It was due to the influence 
of Governor Higgins that the insurance investigation was com¬ 
menced, and it was upon his recommendation that the committee 
selected as its counsel Charles E. Hughes. As I know of my 
own personal knowledge, Governor Higgins appreciated the im¬ 
portance of selecting a superintendent of insurance whose in¬ 
tegrity, capacity and attainments were adequate to meet the 
trying ordeal which faced the reorganization of the department. 
In his opinion, he selected the best man he could obtain for this 
post after the fullest investigation, and with the sole purpose of 
meeting the public expectation and serving the public needs. 
Democrats and Republicans alike felt a sense of relief and of 
gratitude to think that in the turmoil and hysteria of the hour 
Governor Higgins had maintained a calm, wise, statesmanlike 


— I 


Address of Senator White. 781 

policy, and had suggested no blatant demagogue, no mean 
scandalmonger, no one 'seeking by newspaper notoriety to gain 
political favor, but bad recommended a plain, honest, forceful, 
conservative man, long tried in the public service. Every one 
of us felt that the nomination was an admirable one and this 
feeling spread throughout the State. It was believed that Mr. 
Kelsey could be trusted not only to do his duty to the fullest 
extent to the policyholders and to the people of the State, but that 
he had Jlie political and moral courage to see to it that there was 
a “ square deal ” and that every man and every institution had 
his or its just rights. N * 

Mr. President, for twelve years it has been my privilege to 
sit about this circle. Never before have I approached a public 
question with the same solemnity, with the same judicial spirit, 
with which I have approachced the issue of the hour; nay more, 
I have had it in my mind that I could not vote other than for 
this recommendation unless it was evident from the testimony 
that the Superintendent had not only been diligent, honest, faith¬ 
ful, but also that he had exhibited such a degree of ability, initi¬ 
ative and courage as I believe the people expect and have a right 
to demand of every such, public servant. I have tried to give the 
most earnest and dispassionate consideration to this problem. 
For many hours I have studied the testimony—I have read it 
through twice, and after all this I am convinced that there can be 
but one conclusion, provided we confine ourselves to the testi¬ 
mony in this case. 

Two reasons have been given on the flloor in favor of the 
recommendation — not in the speeches, but in the talks about 
the chamber. Some men say they are afraid of their con¬ 
stituents and of the newspapers in their districts. • It is hard to 
believe that a Senator of the State of New York, representing 
here, as every one of you do, a noble constituency, can so far 
forget his oath of office, the dignity and responsibility of his po¬ 
sition in a matter involving a purely judicial proposition, can 
descend to such a condition of groveling servility as to be gov¬ 
erned in his vote on this question, not by what he believes to be 
right, but by what you believe to be the popular clamor at the 
moment. The people of your district do not know what this 
testimony contains-; they do not know what has been accomplished 
during the past eight months by Otto Kelsey; they have heard 
but one side of the case, and they do not know the trials and 


782 


PROCEEDINGS IN SENATE. 


I 


wrongs to which, this man has been subjected. I have implicit 
faith in the sound sense, and in the spirit of fair play which 
abide among the people of the State. I would welcome the op¬ 
portunity to have both the accuser and the accused present fully 
and fairly this cause to such a jury. 

The second reason I have heard advanced was, as others said, 
they feared the vengeance of the Governor. These professed 
friends of Governor Hughes, these men who champion to-day his 
cause, insult him by the imputation. The idea, that a man of 
the character and ideals of Charles E. Hughes could so far forget 
the dignity apd the obligations of the great office which he occu¬ 
pies as to wreak vengeance on the men who have the courage to 
lift their voices and. to vote according to their judgment and sense 
of right, seems to me a monstrous slander. I spurn the cowardly 
accusation; I say that he who offers such an assertion belittles 
himself and defames the Governor. 

There is no Senator here who has a more earnest desire than 
have I to uphold the Executive, because I believe he seeks to do 
a great and courageous public work, but it seems strange that 
men do not realize the distinction between Governor Hughes’ 
position and our position in this matter. Even my distinguished 
friend from the Thirty-ninth (Senator ITinman) who views every 
question with a degree of impartiality and legal learning seldom 
equaled, seems to fail to note the difference between the Gov¬ 
ernor’s attitude and the duty of the Senate. The Governor was 
elected on a pledge to do certain things and for that reason I can 
overlook much of the rashness, much of the unreasonableness, 
much of the haste which has characterized his conduct in this 
recommendation. I have no criticism to offer to his course, be¬ 
cause he made definite and radical pledges and the people elected 
him upon those issues. The Senators here, so far as I know, 
made no such personal pledges. You who are Democrats ran 
upon the Democratic platform, and you who are Republicans 
ran upon the Republican platform. It is true that Governor 
Hughes accepted the Republican platform, but as I view it, he 
was elected upon a personal platform. 

The Governor has merely recommended this removal to the 
Senate. The Senate must now determine in favor or against 
the removal. It is for the Senate to decide a purely judicial 
question. AYe are the judges and the jurors; we have before us 
both the law and the facts. It is for us to say, uninfluenced by 


Address of Senator White. 


783 


ulterior considerations, what the deqision, what the verdict, will 
be. The Senate has the right — it is the privilege of the Senate 
to require a just and reasonable cause before voting for removal. 

My friend from the Thirty-ninth (Senator Hinman) started 
off with an unanswerable argument. So far as he went with his 
law I agree with him. I think this proposition is unanswerable 
— that is, I believe the Senate has the power under section 22 of 
the Public Officers Law, to remove for no cause whatever, if it so 
desires, so we have no difference on the law. What impressed 
me was this: That he failed to point out to the Senate — and I 
am sure it was not from anv desire to withhold the whole truth — 

o 

he failed to point out that it was within the power of the Senate 
to conduct this proceeding in such a way as the Senate deemed 
just and wise. In other words, while the Senate has the absolute 
power to be unjust if it so desires, it also has the power to exer¬ 
cise even-handed justice. Under the Constitution of the State, 
the Senate is the judge of the qualifications of its members. Is 
it reasonable that because the Senate is the judge absolute of the 
qualifications of its members that- it should do an arbitrary and 
grievous wrong by removing a member without just cause? Under 
the legislative law it is within the absolute power of either house 
to expel any member after a report of a committee to inquire 
into the charges. It has the absolute power to determine whether 
these charges are adequate or inadequate, but does that mean that 
the Senate ought to expel a man for no cause wffiatever ? My / 
contention is that regardless of the great powers given the Senate 
in such a case, it is the duty of the Senate to refuse to remove 
any member from this body, to refuse to remove any public officer 
from his post, without just and reasonable cause. 

Mr. President, I will not attempt to review the evidence. It 
has been exhaustively and ably discussed by counsel during the 
morning session. I can only say in regard to it that any man 
who has read it, and has dispelled from his mind all improper, 
irrelevant considerations, and has not become impressed with the 
fact that the Superintendent of Insurance has exercised a high 
degree of force, capacity, initiative, integrity and strength during 
his brief term, passes the limits of comprehension. Tell me, you, 
who from the moment this recommendation was laid upon the 
desk, have been the prosecutors, not the judges, of this man — tell 
me the name of a justice of the Supreme Court or a judge of the 
Court of Appeals who would entertain such a proposition as the 



I 


784 PROCEEDINGS IN SENATE. 

•r* 

removal of Otto Kelsey on the testimony we have before ns? 
There can be but one verdict if this evidence is approached in 
the right spirit. Point out a single line which upholds the con¬ 
tention of inefficiency, weakness, or neglect. Kelsey had a diffi¬ 
cult task to perform; an unscrupulous press from the hour of his 
appointment belittled and abused him because it hated, nay 
more, drove to his grave, the lamented Governor who sent this 
name to the Senate. It was his duty to study and work out all 
the intricacies, the ambiguities and the inconsistencies of the 
present Insurance Law. That law was jammed through the 
Senate and Assembly, not because it was mature, wise legislation, 
but because the clamor of the press forced hurried action, goaded 
the committee into its ill-digested presentation, and then fright¬ 
ened the Legislature into this faulty proceeding. 

With all respect to the Governor, I can see no reason why the 
wishes of the Governor or his obligations should have any weight 
in my mental operations or in the mental operations of any 
member of this body in deciding a purely judicial question. Sup¬ 
pose Mr. Hearst had been elected Governor of the State — only 
a few thousand votes separated the two leading candidates, only 
a few thousand votes would have changed the result in the vast 
number cast — suppose Mr. Ilearst had been elected Governor, 
would my friend from the Thirty-ninth (Senator Ilinman), 
would these same Senators who now intend to vote in the affirma¬ 
tive, have voted for this recommendation? I can see no reason 
why, on a matter entirely disassociated with any party question, 
in a judicial matter, we should change our views according to cir¬ 
cumstances. Why should we vote on a judicial question one way 
for one Governor and another way for another Governor. 

In my opinion, Mr. Kelsey in his handling of the San Fran¬ 
cisco fire situation, which might easily have precipitated not only 
this State, but the entire country into the most serious financial 
straits; in his report to the Legislature, in his rigorous treatment 
of the fraternal companies, and in the splendid work he accom¬ 
plished in bringing them under the strong arm of the law, and 
in his interpretation and execution of the present Insurance Law 
— ill each of these great works it seems to me, he has achieved 
results which entitle him to stand not onlv as an honest, hard- 
working faithful public official, but I believe it has raised him 
to a plane where he stands out one of the foremost public servants 
who ever occupied an office in the government of this imperial 
commonwealth. 


\ 





Address of Senator'White. 785 

v 

I have no patience with the sneering efforts of the Senator 
from the Nineteenth (Senator Page). It is a pity that a man 
of capacity should take the time of the Senate, while discussing 
an important question, involving a time-honored policy of the 
State, one which seeks to overthrow the traditions of a centurv, in 
idle sneering and superficial criticism, engaging in mere person¬ 
alities and quibbles. Mr. President, I seek to discuss this subject 
upon a broader plane — the duty of the Senate, the true policy of 
the Senate, seem to me the considerations of the hour. I cannot 
resist repeating at this moment the inspiring words of Webster: 
k> This is a Senate, a Senate of equals, of men of individual honor 
and personal character and of absolute independence; we know 
no masters; we acknowledge nt> dictators/’ Let us trv to rise to 
this noble conception. 

While I dislike to longer take your time, I must point out one 
other suggestion. Judge Hatch said, and truly said, that there 
was not a single word under oath upon which to base a conclusion 
against Otto Kelsey. You have the mere opinion of the Governor, 
who had had but one month and twenty days — fifty days — 
experience in office when this recommendation reached the Senate. 
There is no intimation in the message that the Governor con¬ 
sidered anything but the life insurance interests in the conduct 
of this great department, and yet, after fifty days’ experience, 
the Governor believes it his duty to recommend the removal of 
Mr. Kelsey. With the Executive’s duty and his conception of it, 
as I said before, I have no inclination to find fault, but when I 
weigh the opinion of the Governor after a brief period, and neces¬ 
sarily most inadequate knowledge against that mass of sworn tes¬ 
timony, I can form but one conclusion. When I first came to 
Albany, and ever since, Otto Kelsey has been singularly beloved 
and respected by every official, irrespective of party or position. 
He has occupied a situation singularly unique. Until this recom¬ 
mendation appeared, I had never heard an intimation except from 
his persecutors, the press, that Otto Kelsey was not one of the most 
independent, forceful, right-minded, courageous, public officials 
within the borders of the State, and all this I have heard fre¬ 
quently expressed. I have known and watched his course all these 
years. It has been a fitting example to the young men who have 
entered the Legislature. Many members I have watched come 
and go, but I have never heard anything but respect for, and ad¬ 
miration of, Otto Kelsey. He has never been a practical poli- 


786 


Proceedings in Senate. 


tician; lie has never been what you would call one of the inner 
circle, but he has always been an earnest, faithful, zealous public 
official, who in his modest, brave way, has pursued his course ac¬ 
cording to his judgment and his conscience. If I were to select a 
man at this hour to protect what might remain after I departed 
from this life I know of no one I would rather trust to do it than 
Otto Kelsey, not only because he is honest and diligent, but also 
because in the arduous labors of official life lie has demonstrated 
that he is a strong man. 

Mr. President and Senators, I realize that sympathy has no 
part in this discussion. -I have endeavored to keep as far as pos¬ 
sible from the purely sentimental side of it.. I realize that it is 
a most important proceeding, involving as I have said, the prece¬ 
dents of a century and seeking, as some men seek upon this floor, 
to set aside the time J honored precedents and traditions of the 
Senate. It is a proceeding so far removed from conservative ac¬ 
tion as to ruthlessly cast aside our settled policies and unwritten 
laws. These should be well weighed and carefully considered 
before they are cast aside in the final outcome. 

Just one word in regard to the personal side. Younger genera¬ 
tions will follow us in rapid succession. The precedent we make 
to-day will long appear upon the records of this Legislature. Are 
you prepared, is it wise, to say by your votes that there is no 
reward, but, obloquy for such faithful services as have been per¬ 
formed by Otto Ivelsey ? Even assuming that he is simply honest 
and diligent — which the Governor believes and has admitted — 
assuming, I say, that he is simply honest and diligent, even then 
is it wise policy to remove the man from office without one word 
of sworn testimony to substantiate the Governor’s opinion that 
he is lacking in initiative ? Kot a single specific utterance, not a 
single act that in any way serves to discredit him or which reflects 
upon the honor or the integrity of the man. Is it safe to establish 
such a precedent as.a final judgment upon such public service as 
this man has practiced for fourteen years ? In my humble judg¬ 
ment, the people ought to show some gratitude to public officials 
who have served faithfully and well for such a period of time. 
Ah! my friends, resign — some say Otto Kelsey should have 
resigned. Could any true man resign when there was an imputa¬ 
tion upon his integrity? Do not say that the first time it was 
announced, that the resignation was desired, was when the Gov¬ 
ernor brought it directly to the cars of Otto Kelsey. It was 


Address of Senator Page. 787 

printed in the public press and was heralded far and wide that 
Otto Kelsey was to he removed, for several weeks before the Gov¬ 
ernor laid the matter before Mr. Kelsey. I would have contempt 
tor the man who would resign under fire, who would not demand 
an investigation as did Kelsey. 

Imbued with the conviction as I am that this Superintendent 
is a fit, superior official, nay, more, that he possesses eminent 
qualifications for this high and responsible post, I assert that in 
the interest of sound policy, in the interest of a decent regard 
for those who spend the best years of their lives in the service of 
the State, in the interest of justice, in the public interest, this 
Senate ought to dare to rise to its duty, and regardless of anyone 
or any fears, every man here should vote on his oath and his con¬ 
science. I shall do so, so help me God. 

Senator Page.— This is rather unexpected from the Senator 
from the Forty-fourth, and it is with some embarrassment that I 
rise to address the Senate; because I could never lose myself and 
all thought of surrounding conditions and of facts, and sail 
through the exalted heights on the wings of eloquence, nor deliver 
myself of such sharp arrows of sarcasm as the gentleman did who 
has just taken his seat. 

I suppose, Mr. President, that being one of those mentioned as 
joined in this fellowship that stood around the Senator from the 
Forty-sixth, that I should extend to the Senate, some apology that 
I am found in such company. I suppose, the time that I am in 
company with the Governor of this State and the President of the 
United States my colleagues of the Senate will agree that I am 
in company with men who have the confidence of the people not 
alone of this State but of the United States. To be accused of 
being friendly with those who are hailed as the most popular men 
in the United States is an offense for which I should apologize; 
and to this extent I offer my apology — that I cannot stand with 
the Senator from the Forty-fourth in front of whom stands the 
Senator from the Forty-second and on the right hand of whom 
stands the Senator from the Seventh and on the left hand my 
genial friend from the Fourteenth. 

Kow, Senators, take your choice and stand where you please. 
The picture has been presented to you by the Senator from the 
Forty-fourth. Those that wish to follow the Senator from the 
Seventh when he appealed to his conscience and his honor — those 
who wish to follow him as a political leader are welcome to it. 



788 


Proceedings in Senate. 

* ✓ 

• # 

But I should prefer to find myself on the other side; my actions 
to he judged by other standards and my acts to be in harmony with 
other ideas. 

I do not believe, however, that it is necessary for every one who 
happens to differ with the Senator from the Forty-fourth or with 
the Senator from the Fortv-second to state that he does so because 

t/ 

he has no mind of his own, because he is a mere rubber stamp 
representing the ideas and used as the mouth-piece for some one 
else. I have -not been much of a rubber stamp man in the past 
and I am a trifle old now to learn in that way. I will suggest 
to my friends on the other side that possibly all wisdom does not 
rest with them, and that when they die there will not be a short¬ 
age or dearth of wisdom. There may be some intelligence that is 
outside of their charmed circle. There may be some who have 
differed from them and who have arrived at conclusions after as 
careful consideration of the facts, and with as high regard to 
their duties to themselves and their fellow men. 

Mr. President, we have had ourselves held up to the execration 
of the Senate first by the counsel to whom was given a courtesy 
never in such a case .extended to any man, of addressing this 
chamber from its floor and to participate in the debate at a time 
when the question before the house was a parliamentary or a legis¬ 
lative question to be determined. We were charged with having 
tried to deprive a man that was accused of his rights. We 
were represented as doing everything in our power to deny him a 
fair hearing and a fair trial; when as a matter of fact the per¬ 
son who stood before this assemblage with a recommendation for 
his removal has been treated in this case with a mercy that far 
outran any demand of any statute. 

There have been given to him privileges that he had no right 
to demand or to expect under the law. He has not been deprived 
of a single right, and more than that lie has been given every 
privilege and every facility that he could ask for. When it comes 
to a matter of right, the Senator from the Thirty-ninth gave the 
law as it is written, gave the law as it stands upon the statute 
books and as it has been interpreted by the courts; and he cor¬ 
rectly stated that when this message came in the Senate had the 
right without any further consideration than that given to the 
message and the testimony taken by the Governor and which he 
laid before us, had the right at that time to vote and as a matter 
of right no one could have claimed that Otto Kelsey would have 


Address of Senator Page. 


789 


been deprived of bis rights or bis privileges under the statutes if 
that had been done. 

The Public Officers Law states distinctly that where an officer 
has been elected he may be removed on the recommendation of 
the Governor for misconduct or malversation in .office on two- 
thirds of the Senators concurring; and it provides further that no 
such removal shall be made unless the party shall have been served 
with a copy of the charges against him and have had an oppor¬ 
tunity to be heard. The Senate shall have power to make such 
lules as it may see fit. The Governor may direct the Attorney- 
General to bring the action or appoint any suitable person to con¬ 
duct the trial of such charges before the Senate. 

Kow, we turn to the next paragraph where an officer has been 
appointed by and with the advice and consent of the Senate, and 
it provides that he may be removed by the Senate upon the recom¬ 
mendation of the Governor, and there it stops. 

There is no provision for a trial. There is no provision for the 
Governor to appoint some one to present the evidence before the 
Legislature, as he would have the power to do if there were charges 
here. Otto Kelsey was allowed to come before the Committee 
with his counsel without being subjected to a cross-examination; 
he was allowed to state anything he wanted to state and make any 
justification of his course that he desired to make. And then, 
Mr. President, we are denounced as those who have set out from 
the very first to deprive this man of his rights, when the fact is 
he came before us surrounded by every consideration that any 
man could ask, and a great deal more than any man could demand. 

With the message of the Governor was transmitted what? Kot 
the evidence of other persons charging this man that he had' 
failed in the administration of his office, not charges from any 
third party, but with it was-transmitted a transcript of an exami¬ 
nation had before the Executive of himself, and I say, who sat in 
the Executive Chamber and listened to every word of that tes¬ 
timony, that the testimony of Otto Kelsey before the Governor 
at that time absolutely justified every charge that was made in 
the message that was sent here. 

Those charges have not been met. Before us in the Judiciary 
Committee we found the position had been “taken which is called 
in the law “ a confession and avoidance.” 

Let us go back a little and consider the conditions which called 
forth the recommendation. It is but a short time that through 



700 Proceedings in Senate. 

• i 

a falling out among-the parties in interest, who were attempting 
to get control of the large insurance companies, that revelations 
of the conditions of those great interests that we had supposed 
were as sound as any financial institutions in the world, that 
we had supposed were carried on by the highest devotion of their 
directors and under the most close and careful scrutiny of public 
officers charged with the duty of doing so. But we found what ? 
We found the moneys that had been paid in to secure those you 
should leave behind you, when you were called away, for, their 
support and maintenance, we found that those moneys were 
being squandered by great captains of industry using the 
money in their own affairs and to build up their individual for¬ 
tunes contrary to the law. We found those conditions had arisen 
because of neglect of certain officials in this Department, not 
alone to properly examine, but to report to their superior offi¬ 
cers the conditions which they found; and more — they abso¬ 
lutely falsely stated the conditions as they found them to exist. 
Had there been a careful scrutiny under the laws as they existed 
before the Armstrong investigation; had the officers charged with 
that duty met their responsibility and discharged the duty, there 
would have been no insurance scandal in this State. 

How, there comes a change in the office of Superintendent. What 
does the new man do ? Does he hunt out the men who had be¬ 
trayed their trust ? Did he drive from office those men who by de¬ 
liberate lies had misled his predecessors ? Did he drive them in the 
first moment of taking office into the oblivion into which they 
should have gone? Ho. Why not? Why, said Mr. Kelsey, just 
before I took office one of the worst calamities which has ever 
visited this country came upon us. In a sister city on the Pacific 
coast there was a great earthquake and a fire broke out, and as a 
result of that there arose a condition in the fire insurance com¬ 
panies that made it necessary for me to retain these very men. 

How I say to you that the very magnitude of the calamity, 
I say that the very fact that in that calamity was involved the 
possibility of great loss, not alone to the stockholders but to the 
policyholders as well, made it incumbent upon the Superin¬ 
tendent of Insurance to have men he could send there to investi¬ 
gate those conditions and examine those officers, upon whose word 
he could rely. Men who would investigate, and really investigate; 
men whose eyes could not be closed to present conditions either 
by present reward or future hope. 


Address of Senator Page. r 791 

u Put/’ said the Superintendent of Insurance, “ here was this 
condition, I had to keep these men who occupied confidential 
relations with the officers of these various fire insurance companies, 
or otherwise the country would have gone to smash.” 

Judge Hatch this morning said that not a dollar was lost to a 
stockholder or a policyholder. How did he know that? I asked 
the Superintendent of Insurance when he was on the stand 
whether he had made any investigation of these companies. He 
said no. I asked if he knew how they paid their losses, and I 
asked about one specific company. He said he did not know. 
1 asked if there was not a book published in the city of Hew York 
by one Alfred M. Best, which was looked upon as a standard work. 
He said he believed there was such a book. There was one com- 
pany whose officers and directors were held up here as enemies of 
the people because one of their directors had written a letter to 
the Superintendent suggesting that the right of the policyholders 
in these companies should he conserved. There has not been a 
great deal said about that to-day, although there was a great deal 
of time taken in the introduction of testimony. These men were 
represented as trying to enforce conditions that would bring about 
the ruin of all other companies, in order that they might get 
business for theirs, and for fear they might not get it into the 
companies they organized their business so that it should drop 
into these other concerns. That was the Continental of Hew York. 
Mr. Best says of the Continental: “ Paid all the claims in full 
upon adjustment, without even cash discount. Treatment of 
claimants courteous and entirely satisfactory. Only four other 
companies settled on this basis, except a few whose losses were 
nominal.” 

Only four other companies under the jurisdiction of the Super¬ 
intendent of Insurance of the State of Hew York settled their 
losses in the San Prancisco fire at a hundred cents on the dollar. 
Do you wonder that they could produce here a certificate signed 
by the presidents and "executive officers of these various insurance 
companies, that the service that had been rendered was most satis¬ 
factory ? Do you wonder that they were not willing to come up 
here, but that they placed their name upon a circular certifying 
to the great service to the insurance world that had been rendered 
by the Superintendent of Insurance? 

Let us see, there were some other insurance companies, and to 
the bosom of one was gathered the pure Vanderpoel when he 


792 Proceedings in Senate. 

\ 

voluntarily resigned on securing a position in tliis company. It 
was as to the settlement of the losses of that company that I 
inquired particularly of the Superintendent when he was on the 
stand. 

The Eagle Eire Insurance Company of Hew York withdrew 
from California and endeavored to compromise generally at 
seventy-five cents on the dollar. A large number of claims were 
settled on that basis but a few were paid on more favorable terms. 
.Many claimants sued rather than accept 75 per cent. With 
additional funds paid in soon after the fire it was able to pay all 

claimants in full. The Commercial Union is one of those com- 

* 

panies that signed the paper. It first denied the liability, and later 
paid fifty cents or 75 per cent., according to the location of the 
risk, except in cases of policies of $500, or less, which they settled 
in full. And so we go on, and I won’t take up the time of the 
Senate by reading each one, of these, but we find settlements all 
the way from 40 per cent, up to 90 per cent, and only four com¬ 
panies paid one hundred cents on the dollar. 

Senator Raines.— Is the Senator -reading from the testimony 
or from something else ? 

Senator Page.— Ho I am reading from Best’s Manual, which 
I called to the attention of Mr. Kelsey when he was on the stand. 

Senator Raines.— Was that percentage meant on the amount 
claimed, or as adjusted, or on the amounts of the policies; which? 

Senator Page.— On the amounts adjusted. There would be no 
criticism in saying that they did not lose more than 40 per cent. 

I realize that this is wandering some from the question before 
the Senate upon the charges, but it is not wandering from the 
question of the particular justification that the Superintendent of 
Insurance made. 

Senator Cohalan.— Will the Senator yield ? 

t/ 

Senator Page.— Yes. 

Senator Cohalan.— I had understood we were here-to decide 
on the charges brought by the Governor, and I would like to know 
whether the Senator from the nineteenth is bringing in new 
charges ? 

Senator Page.— Ho; the Superintendent had the fullest oppor¬ 
tunity to he heard on this. When I asked if he knew of these 
things he said he did not, and I asked why not, and he said, be¬ 
cause he had made no investigation and thus he had left it. He 
.claims that this wonderful skill shown in this fire insurance situa- 






Address or Senator Page. 


793 


tion should wipe away any charge of inefficiency in other matters 
relating to his Department; that he was justified because of this 
fire condition in retaining these men w T ho had shown themselves 
to be unfit for the service. The fact was stated by counsel this 
morning that not a policyholder lost a dollar. I suppose that we 
should be limited to the record of course, although we had no op¬ 
portunity to present testimony or to show that the statements 
made were'not founded in fact. We were to limit ourselves to 
the testimony,' and not to touch upon things that we know and 
which are common knowledge on the street. 

Another claim was made to which I desire to call the attention 
of the Senate, and that is that every letter written or sent out 
by the Department which contained a ruling upon these new 
provisions of law, they were stated by Mr. Kelsey to have been 
made by himself. The forms that were produced and waved be¬ 
fore you this morning, as showing a knowledge of the intricacies 
of the Insurance Law, and in that light were marvelous, yet 
to whom belongs the credit for them ? The standard form of 
policies required the application of minds skilled in the handling 
of insurance matters, and w T e were led to infer that the form w T as 
settled upon and given forth to the world to be copied through¬ 
out the length and breadth of the land, merely from his own 
knowledge. If that were true it would show capacity; it would 
shown" initiative of the highest grade. If that were true it 
would show we have before us one of the most remarkable men 
that ever walked the earth, for the reason that in three months or 
less he could master the intricacies of insurance — actuarial and 
legal, consider the proper phraseology of these contracts which 
have been the subject of judicial questioning and decision, and 
put forth such documents that if they came into court they were 
immediately sustained by the court, and if put before practical 
insurance men w r ere immediately seized upon as something far 
in advance of anything they could formulate themselves. 

Bundles after bundles of letters were produced, some contain¬ 
ing eighty or ninety letters, and some a less number. One of 
these bundles Avas marked Exhibit 40, which had to do with 
section 101 of the Insurance Law; and on page 116 of the printed 
record we find this question was asked of Mr. Kelsey by his 
counsel, and his answers are given: 

“ Q. So if you had doubt in your mind with respect to any 
given question which was given to you for your determination, 
did you apply to the Attorney-General ? A. Always. 



794 


Proceedings in Senate. 


“ Q. And advised with him before yon answered ? A. Yes. 
Of course, that was not every legal question — well, but you said 
about which I had any doubt; yes, that is right. 

“ Q. And those that were clear to your mind you answered 
without consultation ? A. Certainly. 

“ Q. And in those cases where there was any doubt in your 
mind, you went to the Attorney-General ? A. Yes, those which 
were new. 

t 

“ Q. And these rulings which you have made, both courses are 
represented therein? A. Yes. 

“ Q. Yow, may I ask you, in these fifty-four rulings you made, 
if each one was under the so-called Armstrong Law? A. Yes. 

“ Q. So those were all new questions? A. Yew questions; 
yes. 

“ Q. For which you had no precedent ? A. Yo precedent.” 

Yow, here is a question to which I wish to call the attention of 
the Senators: 

“ Q. If I understand you correctly,- Mr. Kelsey, after you 
had either determined the matter vourself, or after consultation 
with the Attorney-General, you then made this determination 
yourself ? A. I did. 

“ Q. There was no intervention of any other person ? A. Yo. 

“ Q. Deputy or otherwise? A. Yo.” 

Yow, if my friends will turn to page 578 of the record, when 
Mr. Patterson was on the stand, by some oversight the counsel 
of Mr. Kelsey brought up this same package of letters, Exhibit 
40, relating to the rulings under section 101, and on examina¬ 
tion by me of the letters I found that they were all initiated. 
“Ans. J. S. P.” J. S. P. was on the stand; that was Mr. Pat¬ 
terson, a man who had been the actuary in the Insurance Depart¬ 
ment for forty years; a man who brought to the consideration of 
any subject, which was within his line, long years of study and 
actuarial experience. 

I asked him this question, on page 578, “ I understand that 
wherever in this Exhibit 40, which relates to section 101, your 
initials appear upon the letters, that those were drafted by you? 
A. Formulated. 

“ Q. Formulated by you and submitted? A. Submitted. 

“ Q. To the Superintendent ? A. Either before or after con¬ 
sultation. 

“ Q. Are those the ones that I went over before ? A. Yes.” 


795 


Address of Senator Page. 

Now, on page 579, the following appears: 

“By Senator Page: 

Q. I understand that wherever the letters have your initials 
on, they were drafted, in the first*instance, by you; is that rights 
A. Yes, sir. 

“ Mr. Hatch.— I think there were ten in the bundle which 
you looked at which were drafted by Mr. Kelsey and the re¬ 
mainder by Mr. Patterson, as I recollect it. 

“ Senator Page.— Yes. 

“ Mr. Mayer.—And some of them the witness has said he 
drafted after consultation with Mr. Kelsey/ 

% 0 

“ By Mr. Mayer: 

“ Q* While the Senator is looking through the bundle let me 
ask this question : Every letter that was finally physically dictated 
by you had your -initials'? A. Yes, sir. 

“ Q. Were these letters having to do with rulings signed by you 
or by Mjr. Kelsey ? A. By Mr. Kelsey. 

“ Q. All of them ? A. All of them. 

“ Q. So that even if you had consulted and had received his 
suggestions of approval or disapproval, as the case might be, and 
then had put the matter into final shape, did you then take the 
matter, letter, communication or whatever it was in such final 
shape, back to Mr. Kelsey ? A. I think I took every one back 
personally. There may have been perhaps one or two that I 
might have handed to Mr. Appleton, going through. Mr. Kelsey 
signed them all personally. 

“ Q. And did you sign? A. No. 

“ Q. Did you sign any letter that had anything to do with the 
ruling under this new law? A. No, no official letter that I 
know of.” 

There we have it now. Here is the positive statement of Otto 
Kelsey on the stand that every one of these particular fifty-four 
letters was prepared by him without the intervention of a single 
deputy; and here the deputy comes on the stand and testifies that 
every one of them was formulated by him and carried to the Super¬ 
intendent for signature. I do not think comment to any extent 
is necessary. 

Then I said to him: 

“ Q. In examining this file I find your initials upon every 


796 


Proceedings in Senate. 


letter except one, and to that one the original is not attached, 
and so there are no initials upon it. Is that so ? A. I pre¬ 
sume that is so, Senator, if you have gone through them. I 
think I initialed them all. 

“ Q. How, of course, no one signed letters in the Department 
but Mr. Kelsey himself, did there? A. Ho, sir; officially. 

“ Q. Ho one else signed letters? A. All of those letters were 
signed personally hy Mr. Kelsey.” 

Senator McCarren.— May I ask the Senator a question ? 

Senator Page.— Certainly. 

Senator McCarren.— Is the Senator trying to N create the impres¬ 
sion that there is no • difference between the formulation and the 
final preparation of letters? 

Senator Page.— I am not trying to create any impression. I 
have read before this Senate the testimony taken under oath of 
two witnesses. I have read the words in which each man saw 
fit to clothe his ideas, and I think the impression is made by the 
two statements of these two men, and does not require any char¬ 
acterization hy me. 

There was another bundle of papers brought in which Mr. 
Kelsey had testified he had written them all. Those related to 
section 97. In that bundle were eighty-seven letters and I asked 
Mr. Kelsey on a short cross-examination — and these two things 
were the only cross-examinations to which Mr. Kelsey was sub- 
' jected — I asked Mr. Kelsey if where the name “ Supt.” was put 
on these letters they were sent to him for his action in the first in¬ 
stance ? — and he said they were. I asked him if another man’s 
name was put on the Tetter would that mean it was sent to the 
other man; and he said, in those cases it was sent to the other man. 
Then I handed him the package of letters and I asked him to go 
through them, through that package, and to state how many of 
those had been sent to him in the first instance. lie did so and 
said, ten; ten out of eighty-seven. Then I said, what does it mean 
when below “ Supt.” are put the words “Ans’d A,” and he an¬ 
swered that it means: Answered by Appleton; and I asked him 
what it meant when they contained “Ans’d J. S. P.,” and he said 
that means it was answered by Mr. Patterson. And so we went 
on, and there was only one that was not marked “Ans’d ” and the 
initial of some deputy upon it; and that one had written on the 
margin “Attorney-General.” 

How those were the only two packages that were examined. 






Address of Senator Armstrong. 797 . 

/ 

If this man had had his rights and had been cross-examined by 
some one who was not limited by the position which he held, if 
some one had carefully prepared a cross-examination of that wit¬ 
ness, where would lie be to-day ? That is why I say he was ex¬ 
tended a mercy that outran justice. 

How, Mr. President, the situation is before us. Governor 
Hughes from his knowledge of the Department, feeling that there 
rested upon him the duty of giving to this State the kind of an 
administration that he on the stump had promised we should 
have, feeling that a man who would keep in office those who had 
so utterly and absolutely betrayed every trust reposed in them 
was not a safe man to keep at the head of this Department, has 
recommended to you that he" be removed. The facts are before 
you; and the question is: Are you willing to assume the responsi¬ 
bility to the people of this State for the administration of that 
office? The responsibility does not rest upon you now; but are 
vou willing to follow the leaders that are acting as bell-wethers 
to-day, .and assuming for themselves the responsibility that now 
rests upon the Executive ? I for one am not, and from the testi¬ 
mony taken before Governor Hughes and transmitted to this 
Legislature, and from not only hearing the testimony which is 
here but from careful examination of its since, I shall vote when 
the time comes to concur in the recommendation of the Gov¬ 
ernor. 

Senator Armstrong.— In all of the thirteen years that I have 
been a member of the Legislature I do not remember that I ever 
approached the performance of a more disagreeable duty. 

I have been associated with Mr. Kelsey during all these thir¬ 
teen years in the public service of this State and part of that time 
as a member of the same legislative body wherein he served so 
admirably; and for all those years we have been personal friends 
and I hope we are yet. 

But I did not come to the Legislature to do only the pleasant 
things. I did not take an office to perform only that which was 
pleasant to perform. I am trying to approach my duty in this 
matter surrounded by the recollections of those thirteen years of 
friendship with this man, and to perform my duty like the 
Senator who has just taken his seat, according to the best of my 
judgment. But I have chosen this time for saying what I have 
to say to the Senate because of the emphasis the Senator from 
the Thirty-eighth has laid upon the fact, as the counsel for Mr. 


798 


PROCEEDINGS IN SENATE. 


Kelsey also laid emphasis upon the fact, that there is no word of 
evidence before the Senate, that there has been no evidence which 
has been laid before the Senate to sustain any of the suggestions 
which led to the recommendation of the Governor. 

Now if this involved a question of moral turpitude in Mr. 
Kelsey; if it involved dishonor and disgrace, I think my friend' 
ship for him is of that quality that it would bias my judgment; 
but I do not consider this to be such a case. 

It is admitted by every one, and conceded here to-day,, 
that 'Otto Kelsey is a truthful man. It is admitted that he is an 
lionest man. It is admitted that he has been an industrious 
man; it is admitted that he is a careful.man; it is admitted that 
he is an assiduous man; and yet the question has not been touched 
upon which affects the merits of this situation. 

The message of the Governor came to us on the 20th of Feb¬ 
ruary, accompanied by the confession of the man involved; and all 
the time since then has been spent in deliberating upon his excuses. 

Let me read something to you: In the sworn testimony of 
Mr. Kelsey before the Governor upon that examination occurred 
some questions and answers which will illustrate what I mean. 
Referring to the condition in the Equitable Life which had at¬ 
tracted great attention and general condemnation the following 
occurred: 

“ Q. Did you endeavor to ascertain who was responsible in the 
' Department for that failure ? ” 

Senator Raines.— What page? 

Senator Armstrong.— Page 34— (Continuing)—meaning the 
Insurance Department. A. No, I did not, beyond the assumption 
that the chief examiner would be the man probably. 

“ Q. Did you examine to ascertain who in the Department 
received these reports from the companies and was responsible for 
looking over them and checking significant items that should , be 
examined ? A. Well, I knew the course is through our statistician, 
Mr. Crippin. 

“ Q. Or make an examination to ascertain who was responsible 
for the neglect in regard to it? A. I don’t think I did; if the 
matter had occurred under the former administration, I don’t 
think I have. 

“ Q. For example, when it appeared that several millions of 
dollars had been borrowed towards the end of the year by men 
whose names were not known as ordinarily borrowers to such an 
extent ? A. Capitalists. 





Address of Senator Armstrong. 


799 


“ Q* Capitalists, so-called; did you seek to ascertain why that 
was not made the subject of inquiry and who in the Department 
w T as responsible ? A. I don’t think I have as yet, Governor. 

U Q. When, for example, the Mutual Life’s report for 1904 
showed there were no gains or losses from securities, as was 
brought out in the course of the insurance investigation and com¬ 
mented upon in the report of the Committee, although in fact 
there had been large gains which were applied to the purpose of 
reducing the book values of real estate, did you make any inquiry 
to find out how such a matter escaped attention? A. I have not, 
I am frank to say, Governor, I haven’t gone back in any of the 
former administrations; the new statutes have put it on a new 
basis and as yet I haven’t had time.” 

Senator Raines.— Hadn’t that all been ascertained by the 
Armstrong Investigating Committee and wasn’t it all in print? 
If so, ^vhat was the use of it; and if it had not been, had the 
Armstrong Investigating Committee performed its duty ? 

Senator Armstrong.— I have already been the subject of the 
comment of one Senator, and I suppose before this debate ceases 
it will develop into a discussion of the Committee of which I had 
the honor to be the Chairman. 

If the Senator will permit me to conclude my argument with¬ 
out interruption it will save time. 

u Q. The new statutes increased the number of details ? 
A. That they are required to report. 

“ Q. The object of my inquiry was to ascertain the efforts that 
you had made to localize responsibility for past neglect so that 
you could see whom you could trust and who was deficient and 
derelict in the Department? A. That has not been done, Gov¬ 
ernor, as yet. 

“ Q. For example, in connection with the Washington Life an 
examination it appeared was ordered after some attention had 
been given the matter of their reported lapses in some weekly 
insurance paper and it became a matter of inquiry in the course 
of the investigation as to how matters of that description could 
have escaped the attention of the Department when the material 
was all at hand in the reports that were submitted to the Depart¬ 
ment. That also was commented on by the Armstrong Com¬ 
mittee. ' Now, did you make an examination to see who was 
responsible for that? A. No, there has been talk once or twice, 
I recall, in regard to the Washington Life with assistants in the 
Department, but not with the idea of punishing anybody. 




800 


Proceedings in Senate. 


“ Q. Well, whether punishment would follow would depend on 
the nature of the information elicited ? A. Yes. 

“ Q. I am speaking now of the efforts that you have made to 
ascertain who in the Department was responsible for what it ap¬ 
peared the Department had failed to do; have you made such 
efforts ? A. I haven’t made any special study on that line, no. 

“ Q. Well, how could you ascertain whether your Department 
is brought up to the proper grade of efficiency if you made no 
effort to localize responsibilities for past misconduct or neglect ? 
A. Well, I have the daily experience of the business that we are 
transacting, and if I come upon information that looks like dere¬ 
liction in the past I should expect to follow it up and show. 

“ Q. You are aware that was precisely the attitude of the 
former Superintendent who hadn’t the advantage of a legislative 
investigation to show them the chance of their mistake ? A. 1 
don’t expect to have any man that is inefficient or untrustworthy, 
but I haven’t had the time, Governor, to go back and look into all 
the details that were brought out on this investigation. 

“ Q. Have you conducted any investigation in the Department 
for the purpose of ascertaining just what each man has done in 
the past and who had been neglectful and who has been indus¬ 
trious and faithful? A.. Hot as to who has been neglectful par¬ 
ticularly. I have had the usual inquiries as to the different 
rooms, the different bureaus, the men who are employed, the 
work they were doing'in systematizing and improving it.” 

How on page 25: 

“ Q. You knew that so far as the examination of the Mutual 
was concerned for the purposes stated by Mr. Yanderpoel in his 
report, to wit, to show that the welfare of the policyholders had 
been conserved by the character of its management, the examina¬ 
tion was a farce, didn’t you? A. Well, I don’t know whether I 
should call it a farce because I didn’t know the opportunity he 
had. He, with his friends, have claimed that at that time the 
statutes were not in shape, or that the accounts were consolidated 
through so many books or something of that sort, so that he wasn’t 
responsible for quite the extreme criticism that he received. 

“ Q. Did you look into the matter to see whether that was 
justified? A. Ho, I did not.” 

How, page 23, referring to this examination spoken of in the 
question I have just read, this was the report of that man, that 
examiner of insurance companies, on the Mutual Life. This was 




801 


Address of Senator Armstrong. 


the special portion of his report at the conclusion of his examina¬ 
tion which had deluded others and had misled Francis Hendricks 
into the unfortunate predicament which he had to confess on the 
witness stand. This is what Mr. Yanderpoel said of the Mutual 
Life and its now notorious method of doing business. 

u If the scope of the investigation were confined solely to ascer¬ 
taining the fact that the corporation was solvent under the law, 
that is, that its assets were properly invested thereunder and 
equal to or in excess of liabilities, the time occupied in determin¬ 
ing this question would be relatively limited compared to that 
■ required to determine likewise whether the company had been 
managed in the best interest of policyholders, the cost of whose 
insurance to them, in a purely mutual company, depends largely 
upon an intelligent administration of its affairs. An examina¬ 
tion, therefore, of receipts and disbursements for a series of years 
becomes necessary, if we are to arrive at any idea of the conduct 
of a company's business with the view of confirming the belief 
that the welfare of all policyholders has been conserved by the 
character of its management in th§ past. I believe the time oc¬ 
cupied in establishing this fact was amply, warranted. It necessi¬ 
tated, among other things, inspecting and reviewing in specific 
detail as to items contained therein the monthly reports of all 
agencies since December 31, 1897. Thus agency receipts from 
new and renewal premiums with corresponding commission dis¬ 
bursements and all expenses of every nature pertaining to the 
procuring of new business or the renewing of old have been 
thoroughly examined, both as to domestic agencies and agencies 
under the supervision of the company’s foreign department. So 
also have all disbursements for expenses properly chargeable to 
home office been exhaustively reviewed. Every facility was af¬ 
forded by the company’s officers and the heads of its several 
departments to thoroughly accomplish the work which has been 
materially expedited by the admirable methods in vogue at the 
home office in the handling of accounts and keeping of books of 
initial or final entry.” 

That is what Mr. Yanderpoel said about the Mutual Life; and 
this was the question: 

“ I will refresh your memory of what Mr. Yanderpoel says in 
his report with regard to the Mutual in 1903, submitted to Su¬ 
perintendent Hendricks, under date of September 24, 1903.” 

Then followed the report I have just read, and the inquiry: 

51 


802 


Proceedings in Senate. 

u Did you read that report by Mr. Yanderpoel ? ” and he answered, 
“ I did.” . , 

“ Q. And you were acquainte d from the matters brought out by 
the Armstrong Committee with the actual condition of things in 
the Mutual Life and the actual state of its bookkeeping? A. As 
developed later. 

“ Q. Now, after that did you regard Mr. Vanderpoel as a fit 
man to have charge of the examination of life insurance com- 
panies? A. Well, I asked him about, that report and his state¬ 
ment of the reasons for its being in that form was that there was 
a strong contest between our State companies and outside com¬ 
panies, and it was regarded as a proper thing to give them a com¬ 
plimentary allusion as to the details of their business. A great 
deal of this — 

“ Q. (Interrupting) Did you regard that as an important 
reason ? A. Well, not entirely, and yet — 

“ Q. (Interrupting) Well, did you in part? A. Ho, but I 
could see how it influenced him. lie said something to me in the 
same relation only a little more so than Mr. Hunter as to the work ; 
and his having had thirty years’ experience with the Department 
in the examinations that were pending, and until we could have a 
new examiner that was a little familiar with the business and to 
take care of it. 

“ Q. Did it occur to you that the greater experience he had had 
the more dangerous he might be ? A. Well, I felt that it was 
incumbent upon me to use much more care, but I didn’t feel that 
I ought to dismiss a man who knew how to do the work and take 
the chance of a new man that would have to be broken in to some 
extent.’ 7 

Then on page 11: 

“ Q. After you took office in May, 1900, did you not take up 
that report for careful study to be advised as to the conditions 
which had been disclosed ? A. I don’t think I did specifically. 

“ Q. Did you take up that part of the report which concerned 
the Insurance Department ? A. I have read that. 

“ Q. When did you first read it? A. I.couldn’t say, Governor, 
whether it was at the time when it was printed in the papers, or 
subsequently. I had the report on my revolving desk there and I 
have referred to it frequently. 

“ Q. When you became Superintendent of Insurance did you 
take up that part of the report touching the Insurance Department 



Address of Senator Armstrong. 


803 


for study ? A. I couldn’t say that I did for study any more than 
to read it from time to time as matters of interest came up. 

Q. Y ou know what I mean, Mr. Superintendent, when you 
took office did you take the report of the Committee for the purpose 
of ascertaining what had been disclosed regarding insurance con¬ 
ditions so that you might be advised of your duty ? A. I don’t 
think that I did any more than as I told you. I had already read 
and there had been more or less talk among the people interested 
in public affairs from time to time. 

u Q* 'W as that all there was of it, of your consideration of that 
matter ? A. That is all, beyond reading it. 

u Q* In the way you have described ? A. At times, yes.” 
Yow I have simply read some excerpts from the forty pages of 
testimony taken in the Executive Chamber, which accompanied 
the Governor’s report. I hope no Senator will rise and attempt 
to accuse me as to any pride of purpose in the Armstrong report. 
We do not regard that report as infallible; nor do we regard the 
report as the uttermost expression of wisdom; but there is no one 
of you sitting about this circle who would willingly have assumed 
the chairmanship of that Committee of Investigation on the 20tli 
day of July, 1905, and you know it, and you regarded it as a* 
tremendous task, and you also know that the job went hunting- 
' for a man to take it, instead of being sought for as a privilege. 
You know it was as hard a task as any legislator ever attempted. 
The difficulties involved were about as great as any I have ever 
heard of in any similar work; it was like wrestling with an 
elephant — the difficulty was to find a place to take hold. 

The Committee discharged its duty honestly and with consider¬ 
able diligence under the leadership of the present Chief Execu¬ 
tive, while the Legislature was practically marking time for its 
report to come in; and it passed its bills in the best way it knew 
how, against the protest of some of you gentlemen who to-day are 
voting against the Governor’s recommendation in the same way 
you voted against those laws. Those laws are not quite what the 
Senator from the Seventh calls them when he says the Armstrong 
laws, otherwise known as the hodge-podge laws. I think they are 
entitled to more dignified nomenclature than that. 

Yow the Governor’s recommendation was based upon tho»c 
forty pages of testimony, which I have alluded to, taken when the 
Governor put the Superintendent under oath and examined him 
— and I haven’t begun to read as much from them as I could, but 


804 


Proceedings in Senate. 

* 

I do not wish to weary your patience — and on the whole forty 
pages, nearly every page is strewn with confession from Mr. 
Kelsev, not of moral derelictions, not of moral turpitude or dis- 
honesty or of disgrace, if you please; but, of what the (governor 
alleges — incompetency. 

Now mind me it is not anything in the nature of a charge against 
a round peg to say it won't fit into a square hole; what 1 
mean is that the integrity of the peg is not accused, but it is not 
shaped so as to fit. It may be a sound peg, honest to the core, but 
it won’t fit and you can’t make it fit in a square hole. Otto Kelsey 
may be and I think he is able to fill many other positions with 
honor to himself and profit to the people; but in my opinion, from 
the bottom of my heart, he has not proved himself to be the man 
to fill this place. 

Is Otto Ivelsey more honest than his predecessor, Superintendent 
Hendricks? Is there a man around this circle who ever heard 
raised a word of criticism against Francis Hendricks; a single 
word of charge or of criticism, of anything disgraceful? And 
vet Francis Hendricks because he relied upon the men in the 
Department who have not been removed, because he pursued the 
same methods Mr. Kelsey has pursued, left that office with less 
public confidence than he accepted it. 

Senator Haines.— Will the Senator permit another question 
here ? 

Senator Armstrong.— I would prefer to finish my statement, 
but I will yield for a question. 

Senator Raines.— I would like if possible to have the Senator 
state to the Senate in what respects either in the judgment of the 
Senator or in the judgment of the press, or from any source, the 

insurance interests of this State have suffered under the adminis- 

/ 

tration of Otto Kelsey ? 

Senator Armstrong.— I will answer that in Yankee fashion: 
Could the Senator have said to me on the 1st of January, 1905, 
at a date preceding the trouble which arose in the life insurance 
world, that any life insurance company in the country ever 
suffered by reason of the administration of Francis Hendricks? 
No; of course not. 

Now we do not know whether they have suffered or not; but 
we do know that this man, under oath, interrogated as to how he 
received the information he might have received as a result of that 
investigation; how far he might have studied it with reference to 




Address of Senator Armstrong. 


805 


liis own Department, or this Department; how far he studied it 
for the purpose of bettering the organization of his Department 
and better qualifying it and enforcing thefiaws in the letter and 
spirit, confessed that he had not done so, and that never during 
all these hearings that we have had has a? word been written on 
the record except the excuses that he had too much work, and too 
little time to do it. 

Senator Raines.— I want to ask the Senator whether he has 
made a frank answer, and if he has not, whether if he had he 
would not have had to concede that under Otto Kelsey’s adminis¬ 
tration every law the Armstrong Committee advocated and had 
placed on the statute books had been carried out to the letter? 

Senator Armstrong.— I will answer that directly, categorically. 
Ko; I admit no such thing. 

The Senator utterly misconceives the situation which was 
created when that recommendation and that testimony was laid 
before us. It is not for sins of commission that Mr. Kelsey is 
complained’ of. It is not that he has not done whaChe did well, 
and some of it excellently; all of it in a pretty good way. But he 
has omitted to do things which should have been done; and the 
man, although industrious in details, has failed to find time to 
rise and take a perspective of the situation which confronted him. 
It is the siiis of omission, and not those of commission that Mr. 
Kelsey is complained of, my friends; and there is where you 
make a mistake in my opinion. When that message was laid before 
us with that testimony, what other recommendation could have 
been made ? Mr. Kelsev might have said : I was deceived as to the 
nature of the questions asked me, and I did not mean to reply in 
some cases as 1 did; but he was an honest man and he did not 
resort to that at all. lie might have withdrawn a reply, and 
offered a new explanation to a question or to an answer on that 
subject. But he didn’t do that. lie had told the truth as has 
been his custom all his life, and fhere was nothing for Mr. Kelsey 
and his counsel to do except to present excuses. 

There was no denial under the circumstances possible. 

Koav perhaps the Senate will realize why I said here weeks ago, 
after that was laid before thq Senate, that what I wanted to hear 
was Otto Kelsey; and I did not care much whether he was under 
oath or not — my confidence in him was such; but T wanted to 
hear everv word he had to say on that situation, and see every 
document or paper he could produce; and when that was done T 




806 


Proceedings in Senate. 


did not care if one witness or one thousand testified about Mr. 
Kelsey. 

1 should have boxed the. compass. If he had explained away 
the situation set up by that testimony, I would be to-day for Otto 
Kelsey. But he has not explained it, and there is not a page of 
the record except such as related to Vanderpoel and Hunter, and 
possibly one other, that he attempts to explain. 

Bid the counsel explain this communication. He talked of the 
message and its contents but did he attempt to explain those 
answers in the forty pages of testimony to which I have referred ? 

There is an old story of the advocate who was advising his 
student as to how he should practice law. He said when you get 
into a case and you are weak on the law, talk on the facts; if 
you get into a case where you are weak on the facts, talk on the 
law; if you get into a case where you are weak both on the facts 
and on the law, then praise your client and abuse the other fellow. 

How those are practically the conditions we have had here, 
without attempting by any levity to discredit Judge Hatch, still 
I say that Judge Hatch was forced by circumstances in line with 
that advice. Having no answer to these replies to the Governor's 
questions — there being nothing that could be said — he devoted 
himself to the excuses. 

How you will understand why I insisted, and got a scolding 
from the Senator from the Forty-second for saying it, that it was 
unnecessary to summon a single witness after Otto Kelsey had 
ceased giving testimony. They called Mr. Paterson and Mr. 
Appleton and Mr. Behan, employees in that office, in the In¬ 
surance Department, to testify to what? That the things Otto 
Kelsey had testified to were* true. Wasn’t it an utter absurdity 
to bring them here to corroborate Otto Kelsey ? 

What was it done for? Just to throw dust and to befog you. 
Some Senator said the forum before which Mr. Kelsey appeared 
was not confined in these Avails, that there were 8,000,000 people 
who did not know of Mr. Kelsey’s honesty, and it Avas necessary in 
order that they might knoAv the facts that this evidence should be 
presented. 

Then they called Mr. Backus and Mr.’ Lawshe, inspectors in 
the Hcav York Life and the Mutual Life,- and they asked them 
for testimony as to the manner in which elections were conducted 
with reference to section 94; and they testified that Mr. Otto 
Kiel sev had instructed them that they were to take charge of the 





Address of Senator Armstrong. 


807 


election and to-see that the ballots were received and properly 
counted. 

Mr. Beddall of the Royal Fire Insurance Company of Liver¬ 
pool; Mr. Ilare of the Norwich Union Fire Insurance Company 
of England; Mr. Herrick of the Niagara Fire Insurance Company, 
and Mr. Sheldon, the president of the Phoenix Insurance Com 
pany, these gentlemen were called and dilated at some length on 
the San Francisco catastrophe and the immense amount of work 
there was in the Department, and of their general confidence in 
the Superintendent as far as the fire insurance people were con¬ 
cerned. 

What was the purpose of that ? It was designed to show if it 
were necessary to add to what Mr. Kelsey said, it was designed to 
show that Mr. Kelsey’s excuse for these answers to the Governor’s 
questions was that he hadn’t time to do these things which the 
Governor thinks he had time to do. So the issue stands pro con- 
fesso as it stood on the 20th of February, 1907. There is nothing 
material before the Senate 'but the message of the Governor and 
the confession of the man in question. 

After Otto Kelsey finished his examination before the Com- 

«/ 

mittee and submitted the documents he had to submit the issue 

% 

still stood pro confesso because lie had not addressed himself to 
the confessions, but to an avoidance of them and to giving ex¬ 
cuses for not being able to do otherwise than he had confessed he 
had done. 

After that was done the Committee called these employees in 
the Department and called these eminent fire insurance men and 
these two other witnesses, of whom I have spoken, and they did 
nothing more than to corroborate what Mr. Kelsey had said in 
his own behalf. 

But it aided in confusing the situation; added somewhat to 
its impressiveness, and threw a little more dust in the air, gradu¬ 
ally forcing it into tin* form of a trial without the substance of 

9J O 

a trial; giving it gradually a character which it could not have 

7 0 O O * 

and cannot have, because you cannot have an issue upon what is 
confessed before you start to try it. 

C J V 

What is the use of deceiving vourself into believing that you 
are trying an issue that is confessed ? It was an absurd and ridicu- 

*y O 

Ions proceeding; but nevertheless it was done. 

Judge Hatch in his argument said that the Governor has never 
visited the Department of Insurance. I think he has. I think 


i 


808 


Proceedings in Senate. 


Ike one visit he made to the Department in 1005 was one of the 
most salutary ever made to a department in the history of this 
State. But Judge Hatch finds fault because the Governor did 
not personally go down and see the enormous amount of letters 
Mr. Kelsey had to sign and the reports he had to examine before 
they were filed away. I do not mean by that to belittle the 
work Otto Kelsey has done in that Department, but I mean to 
say that I know Otto Kelsey’s personal equation as well as any 
man in this Senate. He went into that office with difficulties 
created by the very circumstances which caused him to assume the 
office; and, as he said, he went there reluctantly; and he found 
an immense amount of work on either side of him; and because of 
his nature and disposition he attacked those heaps of work at the 
base of the heap, and he has been exerting his power day and 
night since in an attempt to do it all himself, at least as much as 
he could do ; and he has never had time to straighten up from his 
labors to look over the heaps and see what was a true perspective 
of the situation. 

That is what he has confessed in these forty pages. That is 

why the life insurance situation has not been taken by the neck 

and shaken out. That is what the Senator from the Thirtv-ninth 

«/ 

had in mind when he spoke of the stogy boots and the brass 
knuckles which the Superintendent in that Department should 
have had under the circumstances that were disclosed; and then 
you would not have the conditions that we have here now. 

Mr. Kelsey has done the things he has done and attempted as 
well as any man could do; but he has not addressed himself to these 
things I have referred to, and his answer is: Governor, I have 
been too busy with the results of the San Francisco conflagration 
to take it up. Now if that is a sufficient reason to you, all right; 
but T say to you that after years of personal friendship for Otto 
Kelsey, I say it regretfully, that I do not believe that Otto Kelsey 
has made good — not in all things. lie has made good in many 
things, but I do not believe as Superintendent of that Department 
that he has made good, as good as he ought. 

Now don’t twit me with the fact that I was his counsel upon 
the examination of these proposed forms, or rather do it, if you 
will, but it won’t aid this argument-any, for I assume that job was 
done well enough. 

o • 

dudge Hatch said that from the day those thirteen policies were 
selected out of one hundred or more presented for determination 



A 


Address of Senator Armstroxo. 



there has not been a word of criticism from the insurance world 
as to the justness of the selection or the manner in which it was 
done. Id do not care -to enter upon any defense of them. They 
will justify themselves. Otto Kelsey probably could have done 
the same thing without my assistance. Otto Kelsey is a man of 
real ability; there is no doubt about that. 

• Now something has been said and it was because of that that I 
have said what I have just said: that men were voting here to-day 
for two reasons, as the Senator from the Thirty-eighth said, first, 
they are afraid of their constituents or the newspapers; and, 
second, they are afraid of the Governor. I do not believe any such 
thing, with due deference to the Senator from the Thirty-eighth. 
I have too high an opinion of the Senators around this circle. I 
have seen too many occasions when Senators despite criticism and 
abuse have acted on their judgment. "" 

I do not believe much of the talk of the Old Guard of the Senate. 
I do not know of any Old Guard. There are some who get wrong 
despite my efforts to keep them right. 

Again, 1 want to say that I am glad to be accused of being a 
friend of this Governor. I think from the time I can remember 
Governors of this State that he is one of the very best that ever 
took the oath of office and next to him I think was Frank Hig¬ 
gins ; and that will show’ you how much my judgment is worth. 

But I think Governor Hughes was elected almost entirely on 
account of the faculties lie displayed in this insurance investi¬ 
gation, and elected because in addition to that he succeeded in 
convincing the public which seemed unwilling to be convinced, 
that he meant what he ,said and would do what he- professed, 
and perform what he promised; and so they singled him out from 
the rest of the men on the ticket and elected him as Governor of 
this State; and I am going to be proud to be with him as long 
as I can; but that does not mean that I am going to surrender 
my judgment to his. I do not know what my fellows may think 
of me, hut I have always believed that I set as high a standard 
for my own conduct as do those with whom I am associated; 
and if the time comes when the Governor and I cannot agree 
I will say so. 

What I mean is that in those thirteen years I have been in the 
Legislature I do not know of a time when my vote has been de¬ 
livered to or by anybody from the Governor down, except when it 
was controlled by a Republican caucus; and at times it has been 
cast by Republican caucuses contrary to what my judgment die- 


/ 


S10 Peoceedings in Senate. 

tated. Sometimes I have refused to yield even to a Republican 
caucus; and I have found too the reprisals that have come when 
you refused to do other men’s will. It is when you differ with 
your associates in a party caucus that the mighty hand of the 
party Kibosh is laid on you; some gray-haired man, some leader, 
comes and thumps his hand down on the desk in front of you and 
tells you what you must do and tells you what your sense of duty 
to the party demands. But there are no such forces to be con¬ 
sidered here. 

I wish you gentlemen could realize as I do, Democrats and Re¬ 
publicans, the duty you owe to yourselves and your constituents 
to support this Governor when he is right; and he is right at this 
time. I want to say that the greatest mistake you can make as a 
party is to fail to support this Governor when he is right; and he 
is right nine times out of ten, and has been right ten times out 
of ten so far, except possibly as to some recommendations in his • 
message with which I am not prepared to agree. 

The people of this State have an unbounded and unshaken 
confidence in Governor Hughes. That has steadily grown from 
the day he took his oath of office; every day is adding to it. If 
you Democrats want to disagree with him it will be the greatest 
card for the Republican party, provided the Republicans are wise 
enough to profit by it. That is the party organization duty that 
I wish to have thumped on my desk. We should all stand by the 
Governor; he is overwhelmingly supported by the people, and as 
surely as you crucify him now you won’t be here in the future 
to do it again. Governor Hughes is going to* live long enough, 
and he will live in public life with the esteem he is entitled to, 
because he applies himself to every duty that is committed to him 
with no consideration or purpose of building up a machine or an 
organization, or his machine or organization, but with a desire 
singly to render to the people the best possible service which he 
can render; and wffien lie does that, when he renders-such public 
service, you should be proud to be associated with him, as I am 
proud to speak my thoughts about him to-night. 

Senator Raines.—Will the Senator permit a question? 

Senator Armstrong.— Yes. 

Senator Raines.— Has the Senator recognized that in this mat¬ 
ter there is before us a question of conscience rather than of 
partisanship ? 

Senator Armstrong.— I am sincerely thankful to the Senator 


Address of Senator Armstrong. 811 

for reminding me of that. I recognize that it is partly a ques¬ 
tion of conscience, but 1 do not wish to admit it is wholly a ques¬ 
tion of conscience, although I am willing to dispose of it on that 
issue. 

I believe that public policy should register the votes of Deino- 
ciats and Republicans alike on a question like this for the good 
it will do; and I say it in entire kindness to Otto Kelsey. He is 
unfortunate in that he has attempted a task too great for him; 
and I do not mean to charge him with anything else. 

Kow, witness the Governor’s suggestions on these lines: 

Undoubtedly the work of the Department has been onerous 
and has required a large expenditure of time and thought. Nor 
do I seek to impugn Mr. Kelsey’s integrity. 

‘But the more important the work of the Department the 
greater the need of making it efficient and trustworthy. The 
assiduity of a departmental chief in attention to the details of 
routine cannot compensate for the lack of administrative ca¬ 
pacity.” 

Now that does not mean utter lack of administrative capacity 
or absolute imbecility; it means that the lack of administrative 
capacity confessed in those forty pages was sufficient to sustain 
that sentence in the recommendation: “ With the unparalleled 
size and importance of the interests committed to its care it should 
represent the highest degree of administrative efficiency.” 

Witness some of the other things said: 

“ Most of the evils which have been disclosed by the investiga¬ 
tion would have been impossible had there been a vigorous per¬ 
formance of the duties already laid upon the Department, a 
vigilant watchfulness in the interest of policyholders, and a 
courageous exercise of the powers which the statute confers.” 

Now I say to you that under such an administration of the 
Life Insurance Law as Mr. Kelsey so far has given, another such 
scandal as existed could arise with men reckless enough to think 
it would not be discovered under Isaac Vanderpoel or Mr. Hunter, 
or under other employees who remain there but who are relied 
upon although they be crooked sticks. 

The Governor said: 

“ It was not his official function to commiserate or protect, but 
it was his duty to take vigorous action which would assure to all 
that the great business of life insurance in the State of New York 
was hereafter to be conducted under vigilant supervision.” 


812 


Proceedings in Senate. 


Was it not a fact that the greater the experience of these men 
in this office, the more dangerous they could become; Mr. Kelsey 
was asked and he said: kk Kot as^ a.fact, but as a matter of 
opinion, that he could rely upon those men because he could watch 
their work.” Could he watch the work of the chief examiner in 
New York city examining an insurance company ? Could he 
rely upon a man who had been faithless because he would have 
him under him, because the man would not dare, and he could 
excuse his default in retaining him, hv saying that he watched 
him ? ' 

I think I have taken enough time to demonstrate my position, 
which may not be of any use to other Senators, but it justifies 
my position taken in this very important matter, and it will 
show why I did not believe it- was necessary to put Mr. Kelsey 
under oath; and whv I did not care to hear from these other 
witnesses merelv in corroboration of Mr. Kelsey’s statements and 
why all the opinions of all the fire insurance people in the country 
laid down here would not operate to the extent of one jot or 
tittle to explain away or refute the confession made in these forty 
pages of testimony. 

One of the unfortunate results of this matter is that Mr. Kel¬ 
sey’s usefulness in that Department is largely impaired or wholly 
gone. As one Senator has said, if the Governor’s recommenda¬ 
tion is not concurred in, he will not be the Superintendent of In¬ 
surance appointed by the Governor and in harmony with the ad¬ 
ministration ; he will be your Superintendent, appointed by you, 
responsible—as he knows he is not to the Governor — but re¬ 
sponsible to the Senate, from which body his appointment or 
retention comes. 

That is one unfortunate phase of this subject. I hope the 

recommendation of the Governor in relation to Mr. Otto Kelsey, 

«/ / 

the Superintendent of Insurance, will be concurred in. 

Senator Grady.-— I understand it is the purpose to take an 
adjournment at 6 and I expect by 6:30 to have answered 

suggestions that have been made in support of the Governor’s 
recommendation, and I shall undertake after adjournment, when 
we meet for the evening session, to present my view of this case, 
which I may.sav now is a little different from any views so far 

t j %j t/ 

presented. 

Let me address myself first to the lack of apprehension which 




Address of Senator Grady. 


813 


seems to afiiict- all of the Governor’s friends, as they are pleased 
to array themselves to-day, in understanding just what has been 
claimed by the Superintendent of Insurance and by his counsel. 

Ihe Senator from the Thirty-nin^h said that so good a lawyer 
as Judge Hatch claimed that Mr. Kelsey had the right to a trial. 
He made no such claim. He claimed that according to all prece¬ 
dents Mr. Kelsey had a right to a trial, and in stating that he 
stated a fact that cannot be disputed by anyone acquainted with 
the history of this State. 

Ibis is the first time that charges have been presented accom¬ 
panying a recommendation for removal, and accompanied by a 
denial that they were charges. They were simply suggestions in 
aid of a recommendation How, let me see if we cannot get at 
just what is the law, and that answers the suggestion of the Sen¬ 
ator from the nineteenth as to the degree of responsibility which 
we are willing to assume Under the law the Governor cannot 
remove Mr. Kelsey, under the law there is but .one power in all 
the State that can remove the Superintendent of Insurance; and 
that power is the Senate of the State of Hew York, and the re¬ 
sponsibility we must bear, that we must take full absolute respon¬ 
sibility for his removal, or we must take full absolute responsi¬ 
bility for refusing to remove him upon the grounds stated. 

It is not the Governor with the Senate who removes Mr. Kel¬ 
sey ; it is not the Senate with the Governor who removes; the 
Governor has the power to recommend, but the language of the 
Public Officers Law is that an officer appointed by the Governor 
by and with the advice and consent of the Senate, may be removed 
by the Senate, upon the recommendation of the Governor. So 
that there is no escape for the full measure of responsibility, and 
as a Senator of the State of Hew York I seek no escape-from the 
responsibility which that provision of the law imposes upon me 
to-day. 

Ah, but it is suggested that the Governor might have sent in 
a simple message, “T recommend the removal of Otto Kelsey 
from the office of Superintendent of Insurance,” and it would 
have been within the scope of our authority — and I beg of you 
to distinguish between our authority and our rights the exercise 
of authority is not always rightful exercise of authority — it 
would have been within the scope of our authority to at once 
concur m the recommendation. I hat is the statement of one side 
of the proposition. 


814 


Proceedings in Senate. 


Senator Hinman.— Will the Senator yield? 

Senator Grady.— Surely. 

Senator Hinman.— Is it his judgment or opinion that this 
Senate could remove the Superintendent without the recommenda" 
lion of the Governor ? 

Senator Grady.— Ho. 

Senator Hinman.— Then there must be a concurrence of au¬ 
thority. The question we are called upon to answer is, “ Shall we 
concur ? ” 

Senator Grady.— The Public Officers Act says that the Gov¬ 
ernor shall take the initiative, which is entirely harmless, and we 
shall do the removal, which is the substance of the act. Just as 
the man who brings me a letter is not engaged in extensive corre¬ 
spondence with. me. 

Senator Hinman.— Will you state to the Senate what the 
course of procedure is in a removal — the form? 

Senator Grady.— The form is that the Lieutenant-Governor 
and the Clerk shall certify to the Governor our action on this 
recommendation. I believe that is the resolution of the Senator 
from the Forty-second; or a provision of the law, that it shall be 
certified back to the Governor. 

How let us understand the position I am faking: I was in¬ 
terrupted and the interruption I wish to say to the Senator was 
not relevant and I will have to be more careful about letting him 
interrupt me again. I was saying it was entirely within the 
scope of our authority to at once agree with any recommendation 
as to why the Governor wanted him removed, without any sug¬ 
gestion as to any cause, but it was equally within the scope of our 
authority to send to the Governor and ask what proofs were be¬ 
fore him upon which he based that recommendation; and if he 
said he had no proofs, then under the law it was entirely competent 
for us to say that we would not consider the recommendation of 
the Governor until he took proof. So that you are discussing a 
purely academic question. 

The Senator from the Thirty-ninth called our attention to the 

«/ 

fact that the Governor under the Constitution had the absolute 
right, without the concurrence or without the action of any other 
body, to remove the Superintendent of Public Works, and also 
the Superintendent of Prisons; and if he wants to find a reason 
for that he has but to go back far enough into the history of this 
State to find why those offices were established. The Superin- 



Address of Senator Grady. 


815 


tendent of Public Works is an office created in the place of the 
( anal Commissioner. It was an office created upon the heels of 
the exposure of the canal frauds. It was felt by the disclosures 
that brought about the abolition of elective officers, and the sub¬ 
stitution in their place of appointive officers, that as to that par¬ 
ticular office the Governor should ha.ve absolute power. 

The Superintendent of Prisons is an office created after the 
Inspector of State Prisons was abolished, and it was felt that as 
a part of the legislation embodied in the Constitution, doing away 
with constitutional elective offices and substituting in their place 
an appointive officer, that the Governor might have that power of 
removal in that case. 

But the Superintendent of Insurance is not an 'office created 
as the outcome of any development of wrong or scandal. The 
Superintendent of Insurance has always been an independent 
officer, and has been an independent officer for the very 
reason suggested by the Senator from the Thirty-ninth that it is 
an office which supervises interests so vast and affects so many of 
the citizens that it was never deemed to be under personal politi¬ 
cal control. That is to say it was always regarded as an office that 
should be administered, not as an asset of party, but administered 
from a purely business standpoint as to what was best in the inter¬ 
ests involved. And how vast those interests are, the testimony 
which the Senator from the Forty-sixth did not need at all, did 
not want, was entirely superfluous from his standpoint, testimony 
taken before the Judiciary Committee, must have surprised not 
only the Senators, but the Governor himself. And that is what 
counsel meant when he said that the Governor had never gone 
into the Insurance Department, that naturally he believed that the 
life insurance side of the question with which he had dealt and 
which presented so great a problem that the Senator from the. 
Forty-sixth says it was like wrestling with an elephant, you 
couldn’t oret a hold on it anywheres, it is natural that he should 
believe, and it was natural that the Senator from the Forty-sixth 
should have believed, that the mutual or the life insurance of the 
insurance question was the all important matter of insurance. 

Docs anyone believe that Governor Hughes knew—is there any 
Senator around this circle who will say that until it was disclosed 
that he knew that the San Francisco, fire and the losses which it 
entailed, was a greater event than the Boston, Chicago and Balti¬ 
more fires combined. Do you know as you read the papers day by 


81G 


PROCEEDINGS IN SENATE. 


day of the contention as between the insured and the insurance 
companies, and as to the losses, do you know that it requires confi¬ 
dence as between the insurance officials and the Superintendent of 
Insurance and his subordinates that he had employed, acquiring 
information to prevent a panic that would have wrecked every 
security upon the market to-day? 

Do you know that the impossible had been asked of to the fire 
insurance companies? They were required to bring here at a 
ruinous sacrifice of their securities the cash to pay their losses, and 
they went to the Superintendent of Insurance and said: Cl W.e 
cannot throw these millions of dollars of money upon the market 
all at once, it means ruin, it doubles the losses of this fire in the 
depreciation of our securities. Instead of bringing the money 
here at once, we will have our corporation certify from the home 
offices that every dollar of capital of the fire insurance companies 
doing business here is pledged to meet the losses of the San Fran¬ 
cisco fire. And then testing from the experience 'of the men of 
battle, determining just what such a pledge was worth, he exhib¬ 
ited instead of the cash that certificate of the home office, and in 
two months time there came from out of the vaults of the fire in¬ 
surance companies from over the seas millions of dollars required 
to meet these losses. 

How did the Governor know that ? Ho. He had no oppor¬ 
tunity of knowing. If you ask me anything 1 about life insurance, 
and you ask if the Governor knows it, I will say absolutely there 
is no ramification of that side of the question that he does not 
know all about. But that is but one-half of the insurance prob¬ 
lem in the light of the testimony before the Judiciary Committee. 

How let me give vou the reason assigned by the Senator from 
the Thirty-ninth, why we should remove the Superintendent of 
Insurance. And although stated in different language by the other 
Senators who have spoken in favor of the removal here, it is — 
take his language: The Governor elected by the people seeks the 
removal of Otto Kelsey from the office of Superintendent of In¬ 
surance because he is anxious to have the affairs of the Insurance 
Department administered by some man selected by him. 

How that in the estimation of the Senator from the Thirty- 
ninth is an all-sufficient reason. The Senator from the Forty- 
sixth finds in the testimouvyjf Hr. Kelsey before the Governor a 
confession: so we finrl that while the Senator from the Thirty- 
ninth found no confession, did not argue that there had been any 




I 


Address of Senator Grady. 817 

\ 

confession, without the intimate acquaintance with Mr. Kelsey 
that is enjoyed by the Senator from the Forty-sixth, he took for 
granted all that was said in his favor, but yet there remained this 
iact, that the Governor was anxious to have the affairs of the 
Insurance Department administered by a man named by him. 
And then with a solicitude for the political future and the moral 
welfare of the Democratic party, exhibited by the Senator for the 
first time in the nine years that he has had a seat on this floor, 
they tell you you should bring about that result in the interests of 
the Democratic party. 

That would be the grandest fV ather in .your cap, regardless 
of all these other things, regardless of the nature of the charges, so 
long as the Governor wants the affairs of the Insurance Department 
administered by a man named by him. There is nothing left for 
the Democrats to do except to second the motion and make it as 
easy for the Governor as possible. And I want to always have 
the friendship of the Senator from the Nineteenth; but I must 
notice the place he gave me in the picture that he filled out and 
felt he should exhibit alongside of the painting which the Sen¬ 
ator .from the Fortv-fourth devised. First I complain of being 
put on the left hand side of the picture, because I am anxious at 
all times to get on the right hand in every situation, and then, 
in all earnestness and sincerity, I want to protest that I have 
never sought the company of any Senator who thought he could 
find better company than myself; and I recognize how easy it is 
to find it. I recognize the disadvantage of association with me. 
I only have to read the clippings, without reading the news¬ 
papers, to know that in every newspaper office in this State I 
am an undesirable political quantity. That the kindest name 
they can give me is u Press Ganger Grady,” and a fellow that 
habitually associates with a press gagger cannot expect-to get 
many complimentary notices in the newspapers; and then I 
recognize many other things which you recognize as well as I 
do mvself. Put from the day I have been floor leader by the 
undeserved favor of my Democratic colleagues up to the present 
day, I never sought to % exercise the slightest unworthy influ¬ 
ence on a member in the casting of his vote. I have recog¬ 
nized in every ono of my associates that responsibility which re¬ 
quires that they should vote and register their own opinions; and 
while in public functions I have stated upon the floor upon every 
public question my view, there is not a man who has served in all 
the years that I have been the floor leader on this side of the House, 


818 


Proceedings in Senate. 


r 


who can say I have sought a back floor conference to influence his 
vote upon any question, whether policy or a question of conscience. 

While I give everybody the right to pick his own company, 
and while I hope I shall never find in the Senate anyone more 
unworthy to be associated with than myself, I still want to say 
upon this question every man upon this side of the table will reg¬ 
ister that vote which will express his honest opinion as to 
whether, under the charges made and the evidence adduced, 
Otto Kelsey deserves removal at the hands of the Senate. 

I think I can suspend here as well as at any other time, in order 
that we may have a recess for dinner. 

Senator Raines.— Mr. President, I move that the Senate stand 
in recess until eight o’clock. 

The President.—*You have heard the motion of the Senator from 
the Forty-second that the Senate take a recess until eight o’clock 
this evening. All in favor will indicate by saying “ aye,” con¬ 
trary u no.” The motion is carried. The Senate stands in recess 
until eight o’clock this evening. 


Evening Session, May 2 , 1907 . 

SUBJECT: —CONTINUATION OF CONSIDERATION OF THE GOVERN¬ 
OR’S MESSAGE OF FEBRUARY 20, 1907. 

The President.—- The Senate will please be in order. « 

Senator Grady.— Mr. President. 

The President.— Senator Grady. 

Senator Grady.— Mr. President, at the time that the Senate 
ordered its recess I had proceeded that far in my remarks as to 
direct your attention to the fact that the full responsibility for 
removal must rest upon the Senate; that the language of the 
statute is that the Superintendent of Insurance can be removed 
only by the Senate, and I had endeavored to differentiate as to the 
reasons controlling the procedure to b§ observed in his removal 
with that which has been established for the removal of other 
officers of the State appointed by the Governor. And I now pur¬ 
pose to address myself to the exact situation in which we find 
ourselves, and I shall endeavor in the best judicial attitude that 
1 can maintain, to address you just as a judge might charge a 





Address of Senator Grady. 


819 


Here before you charged with wrong stands Otto Kelsey, for 
if he be not charged with wrong, then this proceeding is idle 
mockery; charged with wrong which, it is suggested, deserves 
his removal from the office which he holds. I am not going to in¬ 
dulge in sentiment, for I know that acting upon your oaths that 
would not move you; I am not going to plead for such friendship 
as may exist between the accused and the Senators upon this 
floor, but it is becoming and proper that every circumstance in¬ 
volved in the position of the accused should be understood and 
appreciated. 

He is fifty-four years old, and that means that his life’s record 
is about made up. He is traveling on the western decline of life, 
and every year that passes brings him closer to the call when he 
shall face the only Judge from whom he need ask for mercy. For 
fourteen years he has occupied a high and honorable station in the 
service of the State, and no man living in like ties has given more 
of himself unselfishly to the public service. Every year of the 
eight which he served in the Assembly brought to him increasing 
glory and brought to him increasing renown. Hot as a brilliant 
man, for his whole nature aspires in a different direction; not as 
a man who courted the glare of the limelight, and who felt that 
public service was unworthy unless it was heralded throughout 
the commonwealth. But he has stood a model among his peers in 
the popular branch of the Legislature. He has had the solving 
of the.most difficult questions that could be presented to a member 
of the Assembly, the Chairman of the Committee on Codes, the 
Chairman of the Cities Committee, the right hand of every Chair¬ 
man upon Ways and Means, during all of those nine years of 
service. And when he was called by the Governor to promotion 
to the position of Deputy Comptroller of the State, and then later 
was elected by the people to the office of Comptroller of the State 
of Hew York, from one end of the State to the other there was 
recognition that an honest, capable, modest public servant had met 
with his reward; and when that selection of the Governor was sub¬ 
mitted to the vote of the great constituency of this State, it was 
ratified at the polls. 

It is one year ago to-day his name came to. this Senate. It 
came an honorable name, a name that any public servant might be 
proud of, a name to keep which untarnished had been his constant 
vigilant care. He knew he had nothing but that name, and the 
record of the public service behind him; and when one year ago 


820 


PnOCEEIUNGS IN SENATE. 

* i / 

to-night that name came in from Governor Higgins as a nominee 
to the office of Superintendent of Insurance, press and public 
alike declared that there had been made and universally confirmed 
a public official who could be trusted to be honest and faithful in 
any and in every emergency. And now we are asked to take 
away his office and to disgrace and dishonor him by removal. 

But why does the Senator from the Thirty-ninth say there is 
nothing of dishonor in his removal ? Why does the Senator from 
the Forty-sixth say there is nothing of disgrace to Otto Kelsey 
involved in an adverse vote to-night ? What man among you, the 
richest in all this country, but would give up the last dollar of 
his fortune rather than change places with him if for the first 
time in his life to-night he leaves the Capitol with bowed head, 
humiliated by the vote of the Senate of the State of Hew York. 

There is nothing of humiliation to him in the recommendation 
of the Governor. He could well reply to that: “ lie did not under¬ 
stand, he could not understand, no one but himself could under¬ 
stand the whole situation with which I was confronted; and his 
Recommendation was made under the misapprehension that my 
hands were free, but when I can have a chance before the State 
Senate of the State of Hew York to show them in just what situ¬ 
ation I was placed, my vindication will come, and no man will 
more readily admit the error into which he was betrayed than the 
Honorable Governor of this State.” And so from the 20th dav 
of February up to this hour Otto Kelsey has walked Hew York’s 
streets and in and out of your office with head erect, satisfied that 
those who knew him knew that his character was without stain 
and his official record was without flaw. What man among us so 
poor, so poor in character and so poor in all that makes life worth 
living, what man among us so poor he would change places with 
him to-night if the vote of this Senate disgraces and dishonors him 
by his removal from his office. 

And why are we asked to remove him ? That brings me to a 
consideration which I beg leave to submit to the judgment of the 
Senate. It must be understood that for months the Senator from 
the Forty-sixth, as Chairman of the Insurance Investigating Com¬ 
mittee, and the present Governor of the State, as counsel for the 
Committee, worked at the life insurance side of the* great public 
problem,, and the necessity for drastic measures and harsh action 
impressed itself upon them in such a manner that they cannot 
have, nor can it be-expected that they will have, any patience in 


Address of Senator Grady. 


821 


dealing with these companies. Their laws must be placed upon the 
statute books at once, although we all knew they were crude, and 
some of us said they were unworkable. Every man criticised in 
their report must be driven out of the public service, because they 
have shown their undesirability if not unworthy character. And 
so it is a sufficient reason in the mind of the Governor that he 
found on the 1st day of January in the office of Superintendent 
of Insurance, two employees who had been particularly criticised 
in the Insurance Committee’s report. One of them a Air. Hunter, 
the first deputy, and the other a Air. Vanderpoel, the chief 
examiner. 

How let it be understood that whatever of menace any man 
might have thought there was to public interests by reason of these 
two men being in the office of the Superintendent, is no longer a 
question about which we need to spend one moment, for both of 
these men are out; whatever there might be of danger as the Sen¬ 
ator from the Forty-sixth suggested, by reason of their great ex¬ 
perience, has come to an end. They are out. 

How why were they retained? Through any political reason? 
No. Through any personal reason? No. For a public reason? 
Yes. For a reason which Otto Kelsey alone knew and regarded 
as a public reason? No. But when he,'one month after the San 
Francisco conflagration, determined that it was the wrong time to 
make a change in his first deputy and in his chief examiner, 
what did he do? What does the evidence show that he did? Ex¬ 
ercising his own free will, did he do it? No; but he went to the 
Governor of the State, the then Governor, and that great, man 
whom the Senator from the Forty-sixth concedes was at least the 
second best Governor the State of New l r ork ever had — he went 
to as pure a soul as ever had a place in the politics of the common¬ 
wealth ; he went to the side of his friend, the Governor of this 
State, Frank Wayland Higgins, and he said, “ I think this is the 
wrong time to make a change in my first deputy and my chief 
examiner;” and Governor Higgins said, “ I think so, too.” Air. 
Hunter and Air. Vanderpoel were to be found in that office on the 
1st day of Januarv, 1907, only because Frank \V. Higgins, Gov- 
ernor of the State of New York, agreed with Air. Otto Kelsey, 
the Superintendent of Insurance, that the time in which a change 
could be beneficially made had not yet arrived. 

Now whv ? Is there any vagueness about the reason assigned ? 
The San Francisco fire occurred on the 18th day of April, 190(1. 


822 


Proceedings, in Senate. 


Otto Kelsey went into the office of Superintendent of Insurance 
on the 17th of May, 1906. What did he find? What did he 
find? lie found that the losses of the San Francisco fire in their 
effect upon home and foreign fire insurance companies was 
greater than anyone outside of insurance circles dreamed of. He 
found the greatest distrust in insurance circles as to the stability, 
if not as to the absolute solvency of these companies; and there a 
man confessing 'to Governor Higgins at the time of his appoint¬ 
ment, confessing his lack of acquaintance with the details of that 
office, was confronted with this situation that no insolvent com¬ 
panies or companies liable to insolvency shall be permitted to take 
new risks; and yet before taking a step says: “I must inform 
myself as to the actual facts. And how may I get that informa¬ 
tion myself? By an examination of their books? In most in- 
\ . 

stances the books with the San Francisco liabilities were not 
within the jurisdiction of the State. What would they show? 
Not the amount of loss, but simply the amount of policies written. 
Not the amount of ultimate liabilities, but only possible liabili¬ 
ties." He determined he must have the most confidential infor¬ 
mation procurable as to the exact facts, and'he found in his De¬ 
partment two men, and two men only, who could get him the in¬ 
formation he desired; one man who had been there thirty vears, 
and another man who during his service had won at least the 
confidence of the fire insurance people; two men who could be 
trusted with confidential disclosures, Robert Hunter and Mr. 
Vanderpoel; and from that day until the day they left the office 
they were employed by the Superintendent of Insurance to ex¬ 
tract from the officials of the fire insurance companies that in¬ 
formation that made it safe for him to act. 

How there is no question in anyone’s mind but that, from the 
day-that he entered upon the duties of his office, there was no 
thought in the mind of Otto Kelsey that either Mr. Hunter or Mr. 
Vanderpoel were to remain permanently under him. In the case 
of Mr. Hunter he was apprised very early that Mr. Hunter had 
no desire to remain under the then existing conditions brought 
about by a change in the law. 

In the case of Mr. Vanderpoel, the Senator from the Nineteenth 
is mistaken that the place he now occupies was found for him 
after he left the Insurance Department. The place was kept for 
him for six months while he was yielding to the solicitation of 
the Superintendent of Insurance to remain in the Department as 


Address of Senator Grady. 823 

an avenue of information until all possible disaster from the San 
Francisco conflagration had passed; and I would ask the Senator 
to read from the testimony the acknowledgment that Mr. Kelsey 
makes of that service rendered him by Mr. Vanderpoel. 

A ow, he was advised by the Senator from the Forty-sixth in 
a personal interview that it was not wise or safe to keep either Mr. 
Hunter or Mr. \ anderpoe! in the Department. lie was talking 
to his friend; he was talking about a man who had his confidence. 
He was talking of a man whom he believed had an interest in the 
success of his administration; and mark what Otto Kelsey said. 
He turned to the Senator from the Forty-sixth and he said: 
“ Don’t be afraid of me. I will make good. I will make good. 
Don’t be afraid of me. You know who Otto Kelsey is, clean and 
honest and fearless and faithful.” And the Senator from the 
Thirty-ninth thought he had exhausted the vocabulary of compli¬ 
ments when he applied these terms to the present Executive of 
the State. 

Tell me that Charles E. Hughes is clean and honest and fear¬ 
less and faithful, and I tell you that not the Governor of this 
State, nor any man in public service in all the world, is cleaner, 
more fearless, more faithful, more strictly honest than is Otto 
Kelsey, the Superintendent of Insurance of the State of Kew 
York. 

The Senator from the Thirty-ninth, I am told, in justification 
for his attitude, says that the Governor was doing his duty as he 
sees it. That is all a man can do, and it is all the public has a 
right to expect; that is all that is needed for the justification of 
any public official, high or low, if from his heart of hearts, his 
conscience, in the presence of his Maker, the man can say: I 
have discharged my public duty faithfully, fearlessly, and as I 
saw it.” He stands acquitted by God, and should stand acquitted 
by man. 

Is there a man that dares say in any relation Otto Kelsey 
failed to do his duty as he saw it ? Is it sufficient that because in 
a matter of judgment he differs with what might be the judgment 
of the Chairman of the Insurance Investigating Committee, or 
what might be the judgment of the counsel of the Investigating 
Committee, that because he differed in judgment from them, is 
that a sufficient reason why he shall be removed from office as 
dishonest and disgraced ? 

I sav the judgment of the counsel of the Insurance Investigat- 

«] il O 


824 


Proceedings tn Senate. 




( 


r 


ing Committee, not that T do not recognize the change that has 
come. That counsel has now become the Governor of the State, 
I shall not dispute; but it was because the people discriminated 
as between the Governor and his associates upon the State ticket 
that he was elected. But sometime when we are discussing some 
other question I will pay my respects to that suggestion. Did he 
seek the judgment of the Governor of the State? 


On the 2d day of January, like the faithful public official that 
he was and is, he went to the Governor and he said: “ Governor, 
you who yesterday changed places with Governor Higgins, Gov¬ 
ernor, as soon as you are ready to talk over matters in my Depart¬ 
ment I am ready to give you the fullest information concerning 
them, and to adopt any suggestion that you may have to make.” 
Was that the act of a man who pretended to a confidence in him¬ 
self, that needed no advice or assistance, or was that the act of an 
honest official who was in a position to go to the head of the 
government, and say, “ I am entangled by no alliances-; I have no 
friendship that, must be maintained; I have no grievances that 
must be redressed, but I come to you, absolutely and entirely free 
to take such suggestions that you may have to give concerning the 
administration of my office, and you can rely upon a man who has 
never failed in a public duty, that your instructions will be carried 
out.” How the Governor did not turn to him and say, “ I do not 
think you are the man for the place.” The Governor did not 
adopt the language of the Senator from the Forty-sixth and say, 
“ I do not think you have made good.” The Governor expressed 
no dissatisfaction, but said that when the time came that con¬ 
ference which Mr. Kelsey had suggested would be taken up. And 
when it came to taking it up, that conference was a conference 
that succeeded the publication of one thousand rumors regarding 
the man in his office, and the Governor asked Otto Kelsey to resign. 

How, remember, he swears that he asked his friend, the late 
Governor of this State, Governor Higgins, to relieve him from the 
responsibility of the position. It was not the position he sought. 
There is no suggestion that it was a position he employed for aught 
but for what he deemed the public protection and the public good; 
and yet when he is asked to resign his place that was a burden to 
him, so long as that resignation involved a suggestion that he had 
been remiss in the slightest degree to' the people of the State of 
Hew York, he refused. Hot that dishonor would be taken back 
with him to his home, not for any stain, not for himself — for as 


/ 






Address of Senator Grady. 


825 


liave told you his record is already made up, and when you speak 
of Otto Kelsey you speak of a character that can face the stake 
itself, and stand upon the. burning pile and undergo the suffering 
of the martyr rather than that an act of his should make his name 
one that must be defended from accusation after he lias gone, by 
the children that he leaves behind. 

He stands before you to-day, not fighting for the badge of official 
declaration, he stands before you to-day not seeking the further 
enjoyment of lucrative public position, but in his home, miles from 
here, a wife and children sit and with a confidence only second to 
the confidence they have in God, and in his eternal justice,— the 
confidence they have in “ father,” and in “ husbandand they 
are waiting for you to vindicate that confidence by your votes. It 
is for that that Otto Kelsey stands here to-night the central figure 
of the contest. 

He was not mistaken by what a refusal to resign meant. Nor 
was he disturbed. lie knew that without a whisper the wishes of 
the Chief Executive are known, and all the power in influencing 
men as far as they or their conscience will permit them to &*o\ 
quite as well as he knew that and quite as well did he under¬ 
stand that he had committed no act which subjected him to just 
criticism. 

I have said that, with the full approval of Governor Higgins, 
Mr. Kelsey retained both Mr. Hunter and Mr. Vanderpoel in 
his Department. And that is the one act for which he is criti¬ 
cised — the one act. The Senators forget to explain to you under 
what conditions he retained them. Now, they were 'the only 
men — that is testified to by Mr. Sheldon, and not contradicted — 
they were the only available men he had for obtaining informa¬ 
tion regarding the fire insurance companies. And under what 
conditions did he retain them ? He said, “ I thought it was en¬ 
tirely safe to retain them as I exercised a constant supervision 
over their work, directed them what to do, and after they had re¬ 
ported results to me I verified in my own way the accuracy of such 
reports.” He sent them to get information. They communicated 
it to him. If further information or more definite information 
was required, he committed that to them; he judged of the char¬ 
acter of the information which was brought to him and the result 
is his best vindication. The fire insurance companies unani- 
mouslv testify that he handled the \ situation with remarkable 
ability and sagacity, just as.be handled every problem which he 




Proceedings in Senate. 


820 


ever undertook, and yet we are asked to remove him from office 
on an indefinite ground. 

Now, Mr. President, I feel that I reflect no insult upon the 
intelligence of this Senate in saying this is not a party question. 
I hope that there is a sense of justice remaining with men of every 
political belief that will always make a question such as this a 
question above party consideration. I might turn to those of my 
political faith and I might discuss politics that would be involved 
in one or the other determinations of this question, and the moment 
I did so I would forfeit the respect of every one of them. I need 
not say that you cannot'make a test of loyalty to governmental 
policies or recommendations of Executives, in a case of this kind. 
As was said by counsel this morning, the case of Otto Kelsey 
stands alone. He asks no mercy; he would scorn a situation where 
he would be required to ask mercy of his fellow-men. He asks for 
justice. That justice he asks for which is built upon a fair con¬ 
sideration of all that controls in official action. Just as any man 
accused of any wrongdoing has a right in court to come with his 
character and place it as against any accusation that may be made, 
he may place his character against the most positive proof; that it is 
entirely within the bounds of legal propriety that a jury shall ac¬ 
cept the character as the highest proof, so it is he comes with his 
character, with his fifty-four years of private life without a stain. 
Mark you, with all of the frailty and weakness that belongs to 
human nature,- but without ever in all of those fifty-four years 
having been accused of a single wrongful act against a fellow- 
man or against any private relation of life. He comes before you 
with fourteen years of honorable service, public service, public 
service which compels the bitterest of his foes to admit that he is 
an honest man, an honest man, with character which justifies the 
Senator from the Forty-sixth in saying that a word from the 
mouth of Otto Kelsey is not strengthened in its truth even if 
backed by a solemn oath. Character which has elevated him, not 
because of political sycophancy, not because of compromise with 
conscience, but because he has lived for fourteen years as rugged 
a figure in the politics of this State as ever the politics of this 
State boasted of. He comes to you with all of that, and he says, 
“ Even if you believe that I have erred in judgment, you cannot 
in conscience say that it should be punished by my removal from 
office.” For no man who knows Otto Kelsey, no man who has the 
slightest acquaintance with his career, but knows that day by day 


Address of Senator Grady. 


827 


he is mastering the details of his office; that no wrong can pos¬ 
sibly coine to the public with him in charge; that no letter leaves 
his office but that he reads it; that not in that great staff of sub¬ 
ordinates is there one man who can sign the name of Otto Kelsey 
to any communication to any of the great constituency of the State 
of New York. 

Now, the Senator from the Nineteenth thought he had found 
a contradiction between the testimony of Mr. Kelsey and the testi¬ 
mony of Mr. Patterson, and he felt it to be his duty to dwell 
upon it and say he was not responsible for the impression, that 
it was the testimony that made the impression, and not him. 

Well, it was not the testimony that made the impression; it 
was the Senator’s forgetfulness that made the impression, because 
he omitted the connecting link. What did Mr. Kelsey say '( When 
it came to the question involving public procedure, he turned it 
over to Mr. Patterson, the actuary of more than forty years’ ex¬ 
perience, and he asked if there was any precedent, and if there 
was any precedent Mr. Patterson reported to Mr. Kelsey the prece¬ 
dent, and if the precedent suited Mr. Kelsey it w^s adhered to 
and Mr. Patterson was instructed to formulate a letter in accord¬ 
ance with that precedent. But that if Mr. Kelsey did not desire 
to follow the old precedent, he established a new ruling, and he 
instructed Mr. Patterson to make that new ruling. And upon that 
— a point that he thought required the attention of the Attorney- 
General of the State — he applied to the law officer of the State, 
and after he got the opinion he had a subordinate formulate an 
answer in accord with that opinion. When he testified that no 
deputy or anyone else came .between him and his decision, he 
meant, and he so explained it, that after he gave the word as to 
what kind of a letter should be written, no man could change that 
decision. It was his act, and that he meant it to be understood 
to be his act, and that is proven by the fact that he himself signed 
every letter that left the office. 

I shall not vote to concur in the recommendation of the Gover- * 
nor. I shall vote my confidence in the official; a confidence that 
rests not upon any warm personal friendship, for I am almost a 
stranger in personal relations to the man that is accused. In the 
twelve years we have been together in the public service most of 
the time in this Capitol, yet beyond the salutations of the morning 
I do not think I have exchanged with him more than a very, very 
few words. But I know the man; I have seen him at work in 



828 


i 


Proceedings in Senate. 


the Committee on Cities; I have seen him at work in other com¬ 
mittees; I know him to be incorruptible in the best sense of the 
term. There are those who believe that a man is incorruptible 
if he won’t stain his hands with the filthy money bribes that some 
wretch offers him to stifle his conscience. That is not Otto Kel¬ 
sey’s idea of incorruptibility. I have seen him in conference upon 
appropriation and surprised him with personal influence, under 
which some of the stoutest hearts have weakened. I have seen him 
resist and repulse political influence as being beneath the notice 
of a conscientious legislator. I have seen him not only an in¬ 
spiration to the young, but I have seen him the admiration of the 
oldest men in the public service. If ever I utter a wish from the 
bottom of my heart, which I only could hope was more worthy 
of him, I hope to-night will not have closed until the clouds that 
have glowered over him since the 20th day of February have been 
parted. For himself there shall come the light of heaven itself to 
reaffirm his confidence that there is a God who rules above, that 
that God who is always on the side of the right, who strengthens 
the hearts and the consciences of every man in every act, and that 
he stands justified not only before his Maker, but as well before 
his fellow-men. 

Senator Fuller.— Mr. President, when listening to the elo¬ 
quence of the Senator who has preceded me and to the eloquent 
address which we all enjoyed from the Senator from the Thirty- 
eighth it is indeed a very difficult matter for a man not to permit 
his judgment to be swayed by his sympathies and emotions. It is 
difficult also for anyone, without any gift, of eloquence such as 
these men have, to stand up here and express his judgment on a 
case like this, because there is interwoven in the case, and I think 
inevitably so, much of the personal element, of the desire for 
sympathy, of the feeling of personal friendship with this man, 
resulting from his extensive acquaintance here, from his own 
beautiful character and personality, and I say it is difficult and 
almost impossible for us to coldly and dispassionately lay aside 
entirely the question of sympathy, the question of what we would 
like to do if we thought we could, and decide the bald question 
of what we should do in the case before us. 

Now, Mr. President, I fully concur in what the Senator from 
the Fourteenth said about our responsibility. We have no right 
to decide this question simply because we want to stand with the 


/ 



Address of Senator Fuller. 


820 


Governor. We have no right to say that because the Governor had 
asked .us to remove Mr. Kelsey that therefore we should do it. 
If I were a Republican, as I am a Democrat, I should, take the 
same position. The responsibility is ours; it is not the Governor 
who removes Mr. Kelsey if he is removed, it is the members of the 
Senate. And so it is for ns individually and on our own conscience 
to take this question on the record which we have before us and 
with the facts which are accessible to us and decide for ourselves 
without regard to the Governor, and I say also without regard to 
Mr. Kelsev. ' > 

«J 

Row as I look at this matter there are three factors that enter 
into the consideration of this case. First is the record bound in 
this book in the testimony given by Mr. Kelsey and his witnesses 
before the Judiciary Committee. Second, there is the testimony 
given by Mr. Kelsey when he was before the Governor. Third, 
and I think this is an important factor and to be considered on a 
par with the other two, there is the deliberately formed opinion 
of Governor Hughes, formed evidently as soon as he entered upon 
his office, that Mr. Kelsey was not the man to fill this place. 

Row let us take the first one of these factors, the testimony 
given by Mr. Kelsey and witnesses before the Judiciary Com¬ 
mittee. If we are to eliminate*the other two I am free to say, 
and I do not know how anyone could form a contrary opinion, 
taking only the testimony before this Committee — I am free to *‘ 
say there is no case made out for the removal of Mr. Kelsey. It 
is true when we come to analyze that testimony that it is to a cer¬ 
tain extent questionable in its form, because it is full of leading 
questions and suggestive questions carefully prepared by skillful 
counsel, suggesting one after another the answers which the wit¬ 
ness should give, and making it easy for a witness prepared in this 
way by skillful counsel to make a fine showing before a com¬ 
mittee; and I think in any court of justice such testimony would 
have been impossible. 

It is also true that it is e% parte testimony, given without cross- 
examination in the form most favorable to the witness; and yet 
taking this testimony alone, by itself, certainly no one would 
undertake to say that Mr. Kelsey had condemned himself by his 
testimony and that of his witnesses. 

But unfortunately — I say that because of the result I have 
arrived at, which is with great reluctance — there are two other 
factors which must be considered and which must be controlling. 


830 


Proceedings in Senate. 


The second is the testimony of Mr. Kelsey when he was brought 
before the Governor and examined. How I am not going into an 
analysis of that testimony; it has been gone through very thor¬ 
oughly by the Senator from the Forty-sixth. I merely want to say 
this: Take this testimony which Mr. Kelsey gave before the 
Governor and place it side by side with that given to the Com¬ 
mittee, and what do you find ? You find a man presenting two 
sides; one side of ability, competency, diligence and efficiency, 
and the other side I think it must be confessed is that of a man 
showing inability, inefficiency and incompetency to a great degree. 

It seems to me almost a case of Dr. Jekyl and Mr. Hyde — one 
side the best and the other side the worst. 

How which of these are we to attach the more weight to? 
I would like to give it to the testimony before the Committee, 
but I cannot do it. That was given as I have said after careful 
preparation under careful coaching and leading and suggestion 
of counsel. 

The other was when the man was taken unawares and without 
opportunity for premeditation; and to my mind the true test of a 
man’s ability and efficiency is shown more fully and clearly by the 
testimony before the Governor, than in any other way; and there 
you find him stumbling and hesitating, admitting he was not 
familiar with the reports as to the character of these men Hunter 
.and Vanderpoel, and making most unsatisfactory statements. 
But the crucial point is right here: It is a fact that Mr. Kelsey 
knew or he was chargeable with knowledge that these men Yander- 
poel and Hunter were most unreliable; that it was largely due to 
them and to their negligence that the bad situation had arisen in 
the life insurance world; that they were men who should not be 
depended upon in any investigations they might make; and yet 
notwithstanding those facts, which were known to everyone who 
cared to have any knowledge on the subject, it yet appears that 
the chief defense Mr. Kelsey makes for keeping those men after 
the San Francisco fire was because he depended upon their in¬ 
formation and their investigations as to the conditions of these 
fire insurance companies, and was relying largely upon the infor¬ 
mation they furnished in order that he might determine his policy. 

How, to speak briefly on the third element, which is an im¬ 
portant one, and not yet touched upon, and that is the deliber¬ 
ately formed opinion of Governor Hughes when he took office 
that Mr. Kelsey v/as not the man for the place; not based on 


Address of Senator Fuller. 


$31 


an opinion as a result of the examination of Mr. Kelsey 
before the Governor, because it was expressed to Mr. Kelsey, 
before he was examined. But here we have a man \^ho is Gov¬ 
ernor, practically as a result of this investigation, a man who as 
counsel for this Insurance Committee had probably during the 
last year and a half obtained a most thorough knowledge of the 
insurance companies of the State. It is said he made no special 
inquiry about fire insurance. Possibly not. Is there any one 
question in the whole domain of our business or political insti¬ 
tutions that comes closer to us than this subject of the condition 
of the life insurance companies ? and certainly on that sub¬ 
ject Mr. Hughes was and is a master. lie knew what the condi¬ 
tions were. He knew what the conditions of the Insurance He- 

♦ 

partment were. He knew how it had been administered by Mr. 
Kelsey. He knew about these two men, Hunter and Vander- 
poel, and their being retained and reliance placed upon them 
by the Superintendent; and I say that he with this knowledge 
and with this experience having formed an opinion, and formed 
it deliberately, in regard to the competency of Mr. Kelsey, that 
opinion itself is worthy to be considered as evidence and as the 
opinion of an expert in regard to the situation. 

I do not believe that opinion was formed with any prejudice. 
I believe everyone here will admit Mr. Hughes is a Christian 
gentleman of the highest type. I do not believe it was with any 
pleasure that he came ito the conclusion that Mr. Kelsey should 
be removed, and, therefore, I am inclined to attach the more 
weight and force to the opinion which the Governor had formed 
in regard to Mr. Kelsey. 

Now, Mr. President, feeling as I do, that of these three factors 
to which I have referred, the second, the testimony before the 
Governor, and the third, the opinion which the Governor had 
formed from his own knowledge of the situation, feeling that 
they are entitled to more weight and consideration than the tes¬ 
timony Mr. Kelsey gave to the Committee under the circum¬ 
stances in which it was given, I have with much hesitation and 
reluctance and regret formed the conclusion deliberately and de¬ 
cisively that it is my duty, without any regard to any personal 
or political consideration, but simply acting as I believe in the 
best interests of the people of this State and in the interests 
of efficiency and the best administration of this most important 
Department, I believe it is my duty to vote for concurrence in 
the recommendation for removal. 


832 


Proceedings in'Senate. 


Senator O’Neil.— Mr. President, my contribution to this dis- 
-cussion will be very brief. I shall aim not to repeat many of 
the things Which have been uttered upon this floor in this debate. 
It is only my purpose to call attention to one or two elements 
which I think should enter into our determination of this ques¬ 
tion that seem to have escaped attention. In my consideration 
of the question I started early in the session, substantially where 
the friends of Otto Kelsev stand to-dav, because his situation 
enlisted my sympathy; but as I deliberated upon the question 
without any conversation with any other Senator or with any 
other persons, day after day I considered it, and I came gradu¬ 
ally to the other extreme; for while I sympathized with him I 
saw other innocent and helpless people who had as profound an 
interest in this question as even Mr. Kelsey himself, for in every 
city and town, and all through the country, in this State and in 
other States, and all throughout our Union, our Nation, all about 
the wide world are scattered policyholders; and no man upon 
this floor that I have heard to-day has spoken of the interest which 
they have in this question. 

They have purchased from the nearby agent, their neighbor, 
in whom they had confidence, a policy of insurance for the pro¬ 
tection of their wives and their families in case they should be 
taken away. In most cases they did not read the policy, or if 
they did, they rarely understood it. Most of them are people of 
moderate means, many of them downright poor, saving their 
money from scant salaries for this very commendable purpose. 
Needless to go over the investigation of last year or the year 
before, which disclosed to these trusting people the condition into 
which these companies in which they were interested had fallen; 
that crafty and designing men, utterly ignoring the fundamental 
principles of honest insurance, had turned these institutions into 
a machine, diverting the money belonging to the class of deferred 
dividend policyholders, a machine for the sole purpose of col¬ 
lecting money from these defenseless people for the purpose of 
accumulating a vast fund of money to be used in the financial 
district for the purpose of controlling other classes of corpora¬ 
tions to the detriment of the stockholders and all the people who 
were interested in the transportation companies. The money that 
was spent unlawfully for many of the sensational purposes was of 
little consequence. The same broad condition obtains to-day. It 
is just as likely to-day that the same condition in two or three 



Address of Senator O’Neil. 


833 


\ears, perhaps in months, maybe at this moment while we are 
debating this question, it may be that the same conditions pre¬ 
vail at this present moment. 

Now, the sole question before this Senate to-night, stripped of 
all sentiment, is the question of the efficiency of Otto Kelsey. 
There is no question here, and I cordially approve of all the 
things that have been said upon this floor in this debate in his 
favor; but I cannot agree that he has shown any comprehension — 
I haven’t seen anywhere in any of the testimony evidence that 
he has comprehended down to the present moment the gravity of 
the problem that confronts this State to-day. 

These policyholders do not know each other. They have ab¬ 
solutely no means of communication; it would cost a fortune, if 
they knew how, to get and keep control of the companies. Be¬ 
tween them and this vast pile of money down there which belongs 
to them, and which has been provided for their protection, there 
is nothing except the State; and the State owes to them the or¬ 
ganization of a Department of Insurance that shall efficiently 
and effectually afford them the protection which they cannot se¬ 
cure in any other manner. It is my belief that that was the 
thought in the mind of the Governor of this State when he 
charged Otto Kelsey with inefficiency. 

It seems to me that you might as well have expected a poet, like 
John Greenleaf Whittier, for instance, to have led the charging 
battalions on the field of Gettysburg, as to expect a mild, gentle¬ 
manly, conservative person like Mr. Otto Kelsey to realize in that 
office the force and efficiency that was described by the Senator 
from the Thirty-ninth this morning. ’My conception of the duty 
of a Senator who accepts a commission from the people to sit 
here upon this floor is, as was said by the Senator from the Forty- 
second, first, a matter of conscience, always conscience, whether 
upon the determination of the removal of a public officer or the 
determination of any other question; that his first duty, outrank¬ 
ing all others, is to the whole people of the State; and subordi¬ 
nate to that is his duty to the district, the local constituents who 
sent him here; and after that comes his duty to any person; and 
looking upon this question from that viewpoint it seems to me 
that the needs of the policyholders of these companies with the 
demands of the people of this State, coming first, that it is the 
duty of every Senator upon this floor, when the clerk states from 
the desk the question, “ Shall the Senate concur in the recom- 

27 


834 


Proceedings in Senate. 


mendation of tlie Governor for tlie removal of Otto Kelsey as 
Superintendent of Insurance ?” to vote in the affirmative. 

Senator Eranchot.— It would not be seemly, sir, for me to 
take up much time in the Senate to-night in discussing this im¬ 
portant issue, for it has not been my privilege to be long in public 
life. It has not been my privilege, as it has been the privilege of 
many Senators upon this floor, to have been in official life for four¬ 
teen years, as has Mr. Kelsey; but I have known him in his home, 
which must be my excuse for standing upon my feet at this mo¬ 
ment and bearing testimony to whoever may hear, that his private 
life was perfect. 

I have listened to this debate since this morning. Every point 
seems to have been abundantly covered by the learned Senators 
around this circle; but there are only two points that seem to 
appeal to me, and they are that there are two charges here, and 
I will state them as I understand them, not in the language of the 
Governor but in my own feeble way. 

I understood from the examination of Otto Kelsey on that 
memorable Monday afternoon in February that there were two 
things he had been derelict in. The first, that he had not taken 
time, in the multiplicity of his duties as Superintendent of Insur¬ 
ance, to weigh in detail the report of the Insurance Committee, 
and all the evidence that led up to that report; and, secondly, 
that he had failed most egregiously in his judgment in so much 
that he had not removed, and removed quickly, Mr. Hunter and 
Mr. Vanderpoel. The greatest inquisitor of the Twentieth Cen¬ 
tury brought out of Otto Kelsey that memorable Monday after¬ 
noon those two facts; and upon those two facts he formulated the 
message which he sent to this honorable body. 

I can recall the scene before me at this moment: We entered 
the spacious room, the Executive Chamber. - There were the tables 
around which were chairs to be occupied by the representatives of 
the press. We had been sitting a short time, when in a few mo¬ 
ments there entered the victim, and in a few moments more 
entered the Executive, followed by one of his secretaries, carrying 
in his arms five volumes of the Insurance Committee report; and 
in the leaves of those reports were markers showing that this was 
to be a cross-examination as to the details of the evidence that 
had been brought out before the Insurance Committee. 

I felt that some one was to be butchered to make a Roman holi- 


Address of Senator Franciiot. 


835 


day. I felt that a disadvantage had been taken somewhere, and 
perhaps I could not at the moment tell where; bnt I knew from 
personal knowledge that it was only at 11 o’clock that day that 
the victim had been notified that he was to be butchered to make 
this Homan holiday. Upon those two facts which I have alluded 
to was based the message of the Executive, concurrence in which 
or noncnrrence is the question before the Senate to-night. 

It is with a very great deal of pleasure that I have always sat 
at the feet of the Senator from the Thirty-ninth when he dispensed 
to this Senate legal lore. I grant to him the supremacy of keen 
analysis that I myself do not possess; but when he leaves the 
realm of legal lore and enters into the application of it to the 
affairs of life, I may assume the privilege of questioning his 
conclusions. 

The Senator from the Thirty-ninth, sir, has produced to-day the 
most painstaking and, it seems to me, the simplest expression of a 
legal argument, and it appealed very much to my intelligence. 
The Senator does not cloud the issue, but he says distinctly that 
there are no charges. Is it possible, sir, we are devoting so much 
time this May evening to the discussion of an academic effusion 
from the Executive ? Is it true that upon those two facts upon 
which was based his message he included no charges ? The Senator 
and other Senators have said that the Governor in simply asking 
for the removal of the Superintendent of Insurance might have 
stopped there, and the Senate could concur or nonconcur as in its 
judgment it saw fit. 

But, sir, he did not stop there. He proceeded to enunciate in 
detail that the Superintendent of Insurance, Mr. Otto Kelsey, was 
inefficient and negligent, that he lacked power and initiative, and 
Mr. Kelsev and his friends would have been craven indeed if they 
had not met that issue fairly and squarely. Talk not to me of 
“ no charges.’ 7 If they are not charges I do not understand the 
English of our fathers. 

I shall not dwell too long upon the remarks of the Senator from 
the Thirty-ninth. lie said that the reputation of the Department 
must be rehabilitated. I submit to the Senators, hasn’t it been 
rehabilitated in the confidence of the world ? Has not the evi¬ 
dence been adduced that in handling the situation in connection 
with the San Francisco conflagration the action of the Hew 
York Department has been followed and copied by every insur¬ 
ance department in the United States? 

■ / 


( 


83G 


Proceedings in Senate. 


There was another thing that the Senator from the Thirty- 
ninth was pleased to say and that was that the Governor did not 
want in the office of the Superintendent of Insurance a gentle¬ 
man who stood upon his dignity, who met all comers with that 
courtesy and that old-timed loveliness that we all know so well. 
Put rather he wanted in the office of Superintendent of Insur¬ 
ance somebody with stogy boots and iron nails and brass knuckles. 
In other words, that the Insurance Department in its liouseclean- 
ing was to adopt the policy of stand up, knock down and drag out; 
that this Insurance Department must take the insurance com¬ 
panies by the throat and shake them. Is that the spirit in which 
the great commonwealth of Hew York is to handle some of its 
most reputable citizens ? Are we always to have a Poman holiday 
and a victim ? I doubt that the great people of this great State 
will indorse that proposition. 

The Senator from the Thirty-ninth had his speech so full of 
meat that it takes some time for me to digest it, but I will not 
tarry long. 

I will turn, if you permit me, now to the speech of the Senator 
from the nineteenth. Heralded widely over this great State as 
sometimes the exponent of the Executive idea; broad in his 
scope of mind as I know him to be; genial in his personality and 
his character, yet this afternoon in defending or asking for con¬ 
currence in this message he devotes his time to splitting hairs 
and turning from one batch of the evidence to another, to show 
that there was a slight discrepancy. 

I think this question is broader and greater than that. I think 
this question is one that affects the life and honor of a man who, as 
one of the Senators who preceded me said, has lived for fifty-four 
years a blameless life. A greater than I has said: “ Who steals 
my purse steals trash; Twas mine, Tis his and has been slave 
to thousands; but he who filches from me my good name takes 
that which not enricheth him and makes me poor, indeed.” So 
that I shall not have to dwell, sir, very long upon the speech of 
the Senator from the nineteenth. Thus I am led to the point 
where perhaps T must meet the issue with the greatest fRoman of 
them all. 

The Senator from the Forty-sixth made a speech which is 
difficult of analysis, for in one moment lie paints Mr. Kelsey’s 
virtues in eulogistic terms high upon the walls of fame; he states 
that Mr. Kelsey is a gentleman upon whose name and escutcheon 


Address of Senator Franchot. 837 

there is no stain. In the next sentence he talks about his negli¬ 
gence and his inefficiency and of his lack of power and of initia¬ 
tive. In thinking this over I am reminded of the tale where a 
farmer and his son went down stream one night in search of their 
lost cow. The son took the left hand side of the creek and the 
father the right. After a little while the son called out to his 
father and said, Father, I see her tracks over here. 7 ’ Then the 
father said, “And I see her tracks here; my son, we will go back 
home; I’ll follow no cow that makes tracks on both sides of the 
creek.” 

The Senator from the Forty-sixth in the plenitude of his 
wise and boundless judgment has seen fit to make history this 
afternoon. The historian of the future will quote the Senator from 
the Forty-sixth as saying that in his opinion our present great 
Chief Executive is the greatest, and he who has gone from his 
usefulness here in this State, takes second place. 

I will say to the Senator from the Forty-sixth that I will stand 
back of no man with my admiration of the qualities that go to 
make up the character of our present great Executive; I will say 
that he has laid before the people of this State and the people 
of this country a policy that is faultless in its mode. But I will 
say to him, as I dare to say in language better than my own, 
“ Let not him who putteth on his armor boast as he who taketh 
it off.” I will say to him that it is yet too soon to say what 
history will think of the two administrations. 

I am not going to detain you but a few moments longer but 
I want to take the people within the sound of my voice into my 
confidence for a moment and to tell them a clean and homely 
story. It was my privilege not very long ago to meet in the house 
in which I then lived in this city a charming old lady. She told 
me she was 79 years of age, that she had come from California 
and that she was the aunt of Otto Kelsey. It seemed to me that 
then I would receive evidence from the former generation when 
Otto Kelsey was a toddling infant at his mother’s knee. She said 
to me: “ I could not stay away. I had to come and see Otto in 
his trouble, for when he was a creeping child, and the few years 
• after that during which I knew him, Otto Kelsey was as good as 
gold.” And she had brought that back in her old age. When she 
was old and feeble, with the shock of the earthquake in San Fran¬ 
cisco, she came back here to lay her tribute of affection at the feet 
of the nephew who in his toddling days was as good as gold. 






838 


Proceedings in Senate. 


And now, sir, and Senators, the time is fast approaching when 
under our oath of office we are to decide this momentous question. 
The Senator from the Thirty-ninth w T ell said this is a greater 
question than any man; hut still it is impossible to eliminate 
from this situation that personal equation. 

Shall we on the evidence concur in this message ? I think not. 
The evidence is so conclusive, and with the explanation of his 
reason for keeping Hunter and Vanderpoel, that reason ’is so 
patent — I am not a lawyer, I am a manufacturer — hut if I with 
my experience were called upon to take charge of a manufacturing 
business which had been badly run in the past, I hardly think 
my first official act would he to discharge every foreman on the job. 
I think I would sit hack in my office chair and gather up the reins 
of that small government, and find out where I was at, as Watson 
said. I would scrutinize my subordinates, overlook their every 
act, as Mr. Ivelsey did, and when the proper time came I would 
make mv selection of those I wanted. 

How, Senators, I trust that I have not taken too much of 
your time, hut it was- impossible for me, knowing Mr. Kelsey 
as I have known him all these years in his private life, to sit in 
this Senate with the right to speak, without adding my testimony 
to his greatness of character — and by that I do not mean great 
in that he is seeking notoriety. He is not a statesman, sixty per 
cent, of which is newspaper notoriety, and the other forty, per¬ 
haps, belonging to himself. lie does not follow that in his public 
life, hut on the contrary he is a modest, true and honest gentle¬ 
man, and I feel that the question is narrowed down to the two 
points I have stated. The issue is brought down to the fact that 
Mr. Kelsey did not remove Mr. Vanderpoel and Mr. Hunter, 
and he did not read the insurance report. “ Ye Gods and Little 
Fishes,” what an infamous crime! 

But the Senator from the Thirty-fourth, whom I love very 
much for his gentle ways, says that the policyholders demand 
this. I <lefy any Senator around this circle to point to one 
single iota wherein the State of Hew York, citizens of the State 
or the policyholders, during Mr. Kelsey’s incumbency of the 
office of Superintendent of Insurance, have lost one cent; on 
the contrary, he has rehabilitated the Department, and he has 
brought out all its pristine glory, where it is now the leader 
among the departments of the country. 

Let us not decide this question upon sentiment. Let us de- 





Address of Senator Tully. 


839 


cide it, as lias been said many times to-day, upon our oaths of 
office. Let us remember in our official capacity to do justice 
to all men. Let us repudiate the suggestion that because we 
sustain Mr. Kelsey, or vote to nonconcur, that we are casting 
any obloquy upon the great Executive of this State. I deny it. 
I say that his infallibility is not greater than that of other men; 
and I know from his broad character and large heart that the 
time will come, if Mr. Kelsey is sustained on this floor, when 
he himself in the plenitude of his wisdom will say he is glad 
of it; and as the distinguished Senator from the Thirty-eighth 
ended his remarks, so I say, “ Before my God I will not be a 
party to sending Otto Kelsey out into the world with a scar 
upon his cheek that may be seen of all men, nor will I scarify 
a citizen who has made good in the councils of this State for so 
many years.” 

Sir, and Senators, there is nothing left now but for me to 
apologize for the time I have taken. 


Senator Tully.— Mr. President, by a somewhat peculiar co¬ 
incidence, it is just one year ago to-day that I was permitted to 
rise in my place in this Senate and ask for immediate confirma¬ 
tion without reference of the nomination of the ILon. Otto 
Kelsey, as Superintendent of Insurance. It is my privilege, one 
year from that date, now, to rise in this Senate and to protest with 
all the vehemence at my command against his removal. 

If I may be permitted a few words, of more or less personal 
reference, I would like to tell some of the facts that led up to 
the appointment of Mr. Kelsey. Although the celebrated Arm¬ 
strong Committee has been out of existence only one short year, 
it is perhaps necessary and at least proper that I should call 
attention of my brother Senators to the fact that I was a mem¬ 
ber of that committee. I give full faith and credence to the 
ability, to the energy and to the hard and efficient work of the 
Senator from the Forty-sixth who headed that committee; but 
I must say I was surprised to learn from his own lips this after¬ 
noon, and for the first time, that the post of chairman of that 
committee had been offered to other Senators and declined be¬ 
cause of its tediousness or hardship. I do not think he could 
have meant what he said. I do not believe he meant to be 
understood as saying that any other member of this Senate was 
asked by the appointing power to head the Insurance Investigat- 


S40 


Proceedings in Senate. 


ing Committee and had declined the opportunity. Be that as 
it may, I do not want this opportunity to go by without saying 
that so far as I am concerned the Senate membership of that 
committee is not unanimous to-night in asking for this Senate 
to remove the present Superintendent of Insurance. 

At the conclusion of the work of that committee, and when 
the task fell to the Governor of appointing a successor to the 
then Superintendent of Insurance, those of us privileged to en¬ 
joy the confidence and the friendship of the man who has since 
gone to his reward, know full well the task that was his. We 
know how he said once and again that he was searching for a 
$25,000 man to fill a $7,000 place. How he had gone from 
one end of the State to the other in his attempt to secure for 
that place a man of unquestioned integrity, of conceded ability, 
who would take the office at the most critical time in its history 
and restore the Insurance Department of the State of Hew York 
to the first position in the United States of America, where it 
justly belonged. 

He was good enough in those days to ask advice of some of us, 
and it fell to my lot in company with two then officials of the 
State, to suggest that failing in his efforts in either direction in 
which he turned, there was no man, within our knowledge at least, 
who was more competent, who had proven better by his previous 
history and record in the public service of the State that he was 
able to fill the place and measure up to the standard needed to 
supply and restore the confidence of the people in the Depart^ 
ment, than the man who was then Comptroller of the State; and 
so it happened that within a few days, as Mr. Kelsey told you on 
the stand, he was asked by the then Governor to accept the post 
of Insurance Superintendent. 

He at first positively refused the position; he said he was 
happy as Comptroller; that the work was altogether pleasing 
to him, and he could look ahead to the tremendous responsibility 
which would fall to the lot of the man who would succeed 
Mr. Hendricks as Superintendent of Insurance. We, who had 
known him for a long time, knew that he would be faithful to 
any trust to which he would be invited; and after deliberation 
he served notice on the then Governor that he would accept the 
place under protest, and devote his whole attention to the task 
before him. And so one year ago to-day there came before this 
Senate for confirmation the nomination of Mr. Otto Kelsey, as 


Address of 'Senator Tully. 


841 


Superintendent of Insurance; and I repeat that it is a curious 
coincidence that, to-night, on the 2d of May, we are asked to 
vote for concurrence in the recommendation of the Governor 
of the State of Hew York for his removal. It seems to me 
there is only one question involved here, as far as the record 
is concerned, and after you have examined the testimony, not 
only that taken before his Excellency the Governor, hut also 
that before the Judiciarv Committee of this body, there is only 
one proposition left, and that is, Should Otto Kelsey be re¬ 
moved from the office which he now holds, because of his failure 
to oust from the Department of Insurance two men, a deputy 
and a chief examiner? That is all there is to this case. 

I remember distinctly that as late as September of last year, 
at the Saratoga convention, I told Mr. Kelsey that it seemed to 
me, as a member of the Insurance Investigating Committee, that 
he could not afford to continue Mr. Hunter and Mr. Yanderpoel 
in the employ of the Insurance Department any longer. His 
answer to me then was as clear and as satisfying as his answer 
to the same proposition has been, both before the Governor and 
before the Judiciary Committee of this body; it was, that he 
had no sooner taken his place as Superintendent of Insurance 
than he was confronted with the problems resulting from the 
earthquake in San Francisco; that thousands of people in the 
State of Hew York at a time when we were investigating the 
subject of life insurance had wholly overlooked the fact that 
the great majority of the detail and the work of the Department 
has to do not with the subject of life insurance, but with the 
subject of fire and casualty insurance. He stated that he had 
found himself face to face with what amounted to practically 
a crisis in the affairs of the fire insurance companies doing busi¬ 
ness in the State of Hew York; and, as he said to me in Sep¬ 
tember, “ I found it to be absolutely impossible to invite Mr. Yan¬ 
derpoel or Mr. Hunter to get out of the Department, stranger 
as I was to the whole business of insurance, and particularly to 
the question of fire insurance, to which I had never addressed 
myself.” 

Mr. President, you might as well say that the register of any 
county or the county clerk of any county, taking office on. the 1st 
day of January in any year, might as well and as reasonably 
call for the resignation of every technical deputy or subordinate 
in that office. The Senator from the Forty-seventh has well said: 


Proceedings in Senate. 


842 

What business man is there about this circle who would accept 
the management of a large business, without knowledge of its 
affairs, who would upon coming into office turn to his foremen 
and assistants at the very outset and say, “ Get thee goneK ? 

The only question seems to be the retirement of these two men, 
both of whom had arranged with Mr. Kelsey, or he had arranged 
with them, to leave the Department as soon as he could get on 
without their services. 

The Senator from the Forty-sixth has alluded to the testimony 
of Mr. Kelsey before the Governor. I would rather not say 
anything about that examination, but candor compels me to state 
that I regarded it as particularly unfair. Kotified of a hear¬ 
ing, he naturally expected it would be in some measure at least 
semi-private, and then to go into the Executive Chamber and 
find it well filled, and places reserved for the representatives of 
the press, and then to be met by the Chief Executive of the State, 
one of the most brilliant examiners of the bar of this or any 
other State. Mr. Kelsey was there granted the privilege by 
the Ghief Executive to rise in his place and be sworn; when it 
was suggested by him that he was without counsel he was in¬ 
formed by the Governor that he hardly thought it necessary, as 
his every right would be conserved. 

What man in this circle knowing Otto Kelsey one-quarter as 
well as I do, knowing his diffidence and his modesty, was sur¬ 
prised, if he was there, to see him in the seat of the witness, 
facing this brilliant inquisitor, and absolutely at his mercy. 
And I ask the Governor of the State to-night to tell me, in all 
fairness, if he thinks that was a decent proceeding. The few 
men of my acquaintance who will criticise me for my vote here 
to-night have, almost without exception, said they believed that 
the Governor was entitled to the resignation of Mr. Kelsey, but 
they were surprised and disappointed at the way the hearing 
was had in the Executive Chamber. They believed in common 
with a great many others that the American principle so earnestly 
stated by the Chief Executive of the nation had been pre-emi¬ 
nently violated in that Mr. Kelsey did not get a square deal. 

I have no quarrel with the Governor of the State, and I yield 
to no man in this circle, not even to the Senator from the Nine¬ 
teenth and the Senator from the Forty-sixth, in my admiration 
and general respect and friendship for him; and I believe the 
time will yet come, Mr. President, when he will have more re- 


Address of Senator Tully. 843 

spect,. cherish more admiration, for the men who dared to stand 
in this chamber honestly asserting that Mr. Kelsey should not 
be removed, that belief being born from an intimate knowledge 
of the situation, than he will ever have for those men who boxed 
their compasses long before the testimony was taken in this 
proceeding. 

I know Governor Hughes, as a result of my association with 
him in the Insurance Investigation, to be a broad-minded, able, 
honest and energetic man, as every man in the State now knows 
him to be * and while I hold no brief from him in this matter, 
nevertheless, I feel warranted in denying any insinuation that 
his respect will be all with the men who are to-niglit voting with 
his recommendation, and his condemnation be with those who 
refused to do so. 

The newspapers of the State have been busy recently endeav¬ 
oring to prove that the failure of this body to remove Mr. Kel¬ 
sey means the defeat of the Governor’s legislation and the poli¬ 
cies which he stands for. I know some Senators on this side of 
the 'chamber who will vote against removal to-night who are 
as honestly co-operating with the Governor along legislative lines 
as any Senator who will vote for this to-night. And speaking 
for myself, I deny most emphatically that my position in this 
matter can in any way be regarded as any opposition to the 
Governor of this State on any other given proposition. 

We have been told that this question is no longer one of the 
personality of Mr. Kelsey; that he is a kind, honest, industrious, 
decent citizen; but that the only question involved now is as to 
whether the Governor shall have the resignation for which he asks, 
and which was denied him. I say, in my best judgment, that 
it is unfair for anybody, including the Governor of the State of 
Hew York, to feel that he or anybody else has a right to demand 
the resignation of any officer of the State of Hew York, chosen 
by election or by appointment for a fixed and definite term, 
whether he is in sympathy with him or not, except upon specific 
and proven charges. 

Mr. Kelsey was appointed for the term of three years, which 
tenure was reiterated in the statutes which our Committee 
adopted a little over a year ago. There was no change made in 
the term of office for the Superintendent of Insurance, with 
the expectation and the right to hold out during that period of 
three years, unless some competent jurisdiction or authority 


844 


PROCEEDINGS IN SENATE. 


would prove to this Senate- that he was guilty of such conduct 
as merited his removal from office and his being cast out as a 
dismissed and degraded official; and as the Senator from the 
Eighth says, and as he admits despite the vote he will cast, there 
is absolutely nothing in this testimony which judged by itself — 
and he has a. right to be judged by the record — will justify 
the vote of any one of these fifty-one men to remove him from 
office. * pI'I^Ly 

Governor Hughes has recently said that it is not enough that 
our public officials should keep within the provisions of the Penal 
Code. He is entirely right. But I would like to ask the Gpv- 
ernor, wlien he made that statement, which I take it was said 
advisedly, whether he had it in his mind that any official in the 
State of Hew York has stepped outside the limits of the Penal 
Code. If he has, I am sure the Governor will not fail in his 
duty to call the attention of this Senate, or the attention of the 
district attorney of the proper county to the existence of such a 
crime, and as far as lies within my power I shall be as active 
and as energetic in prosecuting that official as I am now in de¬ 
fending Otto Kelsey. Indeed, he has kept within the limits of 
the Penal Code, and of every code of decency and morality. 
The Governor does not impugn his integrity; no; nor does any 
man, woman or child in the State of Hew York. 

Show me a man with a record of fourteen years’ public service, 
nine years in the Assembly and the balance of the time in the office 
of the Comptroller of the State of Hew York, as deputy first 
and later as Comptroller, and as Superintendent of Insurance, 
with a more spotless reputation and a more genuine affection foi 1 
him in the hearts of the people of the State than has Otto Kelsey. 

Senators, I have lived almost under the shadow of his home all 
of my life. I have been his friend for fifteen years. I have been 
his associate for the three years I have been privileged to sit here, 
and during all those years I have slept under the same roof with 
him. I think I might on that account lay claim to a more intimate 
acquaintance with him than any other man around this circle; 
and I say I have never known a man of more exemplary habits 
than Otto Kelsey. There is no blemish on him; and the man 
who called him weak and believes he moves along the lines of 
least resistance, does not know the man. He is strong to the 
point of stubbornness; but at the same time he has as attractive 
a disposition as any man it has been my privilege to know. 



Address of Senator Tully. 


845 


The Senator from the Forty-sixth this afternoon and the Sena¬ 
tor from the Thirty-ninth described the sort of man who they 
say is needed in the office of Superintendent of Insurance, a man 
who must wear stogy boots, brass knuckles and all that sort of 
thing. Mr. President, they would have us believe that what is 
needed in the office of Superintendent of Insurance is a bull in a 
china shop. I take it that is not the sort of a man needed in any 
department in this great State of Few \ ork. On the contrary, 
what is needed is a man of firmness and decision, of integrity and 
•5 i 1 / ^ energy, and in every one of these car¬ 

dinal virtues I say our present Superintendent of Insurance is 
well furnished. 

a Confession ” is applied to the testimony of Mr. Kelsey before 
the Governor. Why, viewed in the light of some of the"events 
connected with the case, it was not a confession, but a failure to 
brag. The trouble is, as President Schurman said of Governor 
Higgins, the Superintendent “ is the worst self advertiser ” who 
ever headed a Department in this State; and I would like to know 
if we have now reached the state where the ability to make a 
large noise is the best qualification for a Department head. 
I regret exceedingly that my dear friend, the Senator from the 
Forty-sixth, sees fit to attribute so much bad faith to the defenders 
of Mr. Kelsey. lie says that this proceeding has been one of 
countless and unnecessary delays, and apparently is of the opinion 
that every move by Mr. Kelsey’s counsel and his friends has been 
an effort to throw dust into the eyes of the Senators, and through 
them into the eyes of the people of the State of Few York. I in¬ 
sist that all the virtue in this situation has not been upon one side. 
I insist that every movement of Mr. Kelsey and his counsel and 
those men about this circle who have espoused his cause, has been 
prompted by the spirit of fair play and a desire to see that every 
courtesy, right and privilege that should be his, would be shown 
him. 

Those of you who were here at the opening session of the 
Committee will remember that when the privilege of being sworn 
and of calling witnesses in his own behalf Avas about to be denied 
to Mr. Kelsey, his chief counsel voiced a protest and said he 
thought if that rule avouIc! be adopted that he did not care to re¬ 
main ; and one member of the Committee, addressing the counsel 
said he hoped that it would be remembered that they were Gfor* 
the Committee by courted sxd if they did not choose to remain 



84G 


PROCEEDINGS IN SENATE. 


they could go. So all the virtue of this situation is not on one 
side; as far as -that proposition is concerned nobody can point a 
finger to a single unnecessary delay, to a single attempt to throw 
dust into the eyes of the people on the part of Mr. Kelsey, his 
counsel or his friends. The truth is that for these three months 
we have endeavored to see to it that he should have a right to be 
heard and that every bit of testimony he wished to produce might 
be presented here before a committee of the Senate, so that when 
it came to the final vote, no Senator could express an excuse for 
his vote that he was not familiar with the facts or the testimony 
in the proceeding. So far as the question of public sentiment 
is concerned, I believe the sentiment of the State of Kew York 
has been for at least six weeks and perhaps two months steadily 
changing, growing day by day in favor of Mr. Kelsey. « I cannot 
speak of course for many portions of the State. I can speak for 
my own district, and the statement cannot be denied by anybody 
here, or truthfully by anybody at home, that the constituency of 
the two counties which I represent, Allegany and Steuben, is over¬ 
whelmingly in favor of his retention in office. We say with the 
Senator from the Thirty-eighth that if the first move in the 
reorganization of the departments of the State of Kew York, many 
of which are in need of such rehabilitation, is made against Otto 
Kelsey, what possible encouragement can there be for the young 
men, the honest young men of the State oKKew York interested 
in the politics of their home communities, and who desire to be 
of some use to the State, what interest can there be for them to 
enter the service of the State when they see a man like Otto 
Kelsey slaughtered. 

I listened with interest to the sympathy poured out here by the 
Senators from the Thirty-ninth, the Eighth, the Forty-sixth and 
some other districts. Mr. Kelsey no doubt appreciates their sym¬ 
pathy ; but I suppose he is reminded of the story of the two young 
men who were at college together, and after leaving college one 
marched along the road of success, the other of failure, and he 
lost his money and finally wound up as a vendor x>f pies; one day 
his fellow classmate stepped off a train at the station where the 
unfortunate was selling his wares. Recognizing his former class¬ 
mate, he said to him: “ Bill, what are you doing here?’ 7 Said 
Bill, “ I had bad luck, lost my money and now I am selling pies.” 
“ I am mighty sorry for you, and you have my sympathy,” said 
the lucky one. “ Well, I don’t want your sympathy,” said his 
friend, i( but for God’s sake buy a pie.” 


Address of Senator Tully. 


847 


I am glad, to listen to the statements of the Senator from the 
Foity-sixth too. I am sure when lie told ns in one breath of his 
deliverence from bondage, he had forgotten that he had delivered 
a few kind words as to what would happen in another quarter if 
v e did not \ote to concur. lie said that he could remember 
many times when a gray haired leader in the caucuses of the 
Republican Senators would thump his fist down on the table and 
sa} . \ on have got to vote for this — or you have got to vote for 
that. I submit to some of my brethren that in relation to the 
mortgage tax and the insurance legislation that there was a gray 
haired leader who came around and thumped the table and you 
will all remember it was the distinguished gray haired Senator 
from the Forty-sixth. 

I have occupied more time already than I have a right to, but 
T wanted to utter my word of tribute and respect and affection 
for a man I have known a great many years, one whom I now be¬ 
lieve to be the victim of a dreadfully unfair proposition. It is 
sought here to-night to remove from office the head of a depart¬ 
ment for almost the first time in a quarter of a century, and if we 
remove Mr. Kelsey by our votes to-night I say to every Senator 
who contemplates .such a vote that he will regret it to the longest 
day of his life, when the hysteria which is at present character¬ 
izing the State has passed away, when the people have ^calmly 
contemplated the question of removal of a man like Mr. Kelsey 
because he failed to discharge two men whose services he has told 
us were absolutely necessary for the time being. And let me 
say I haven’t any sympathy with Mr. Vanderpoel or with Mr. 
Hunter. I joined in the proposition that though by their testi¬ 
mony before the Insurance Committee it was manifest that they 
were unfit to be in the sendee of this great State yet there was a 
time when their services were necessary pro tempore; and because 
the Superintendent utilized those services, we are asked to remove 
him from the great office he holds after many years of faithful 
and intelligent public service. I insist that the verdict will be 
in favor of this defendant. I urge you, my fellow Senators, that 
before you vote on this proposition you apply the Golden Rule to 
yourselves: ■ Whether after fourteen years of honest and efficient 
service in legislative and department halls it was sought to treat 
you in this way, how would you have us vote if we were sitting in 
the Senate of the State of Hew York? 

In the name of decency, in the name of a square deal and of 



848 


Proceedings in Senate. 


justice and of humanity I beseech you my fellow Senators to vote 
with me in refusing to concur in this recommendation. 

Senator Davis.— It is not my intention to say anything fur¬ 
ther at this late hour on this matter, but owing to a statement 
of the Senator from the Forty-third (Senator Tully) I feel it 
to be a duty to state to this Senate just wffiat took place in the 
Judiciary Committee, and to reiterate at this time that I did 
say to the counsel for Superintendent Kelsey that he was be¬ 
fore that Committee by the courtesy of the ’Committee, and not 
by reason of any right given him by any law upon the statute- 
books to-day. 

The Senator from the Forty-third speaks of the tenure of office 
of the Superintendent of Insurance. The tenure of office, while 
the Insurance Law 7 says it may he three years, yet Mr. Kelsey 
accepted that position knowing full well that the Governor v 7 ho 
appointed him to that position, or any other Governor that might 
succeed that Governor could at any time send to the Senate of 
the State a message, such as the one transmitted to this Senate 
on the 20th of February, 1907, and if concurred in by the 
Senate his term of office would end, irrespective of the tenure 
referred to by the Senator from the Forty-third. 

As has been stated on the floor of the Senate, and as I stated 
yesterday, I wish to repeat: That upon receipt of the message 
from the Governor wherein he states, “ I recommend the re¬ 
moval of Otto Kelsey from the office of Superintendent of In¬ 
surance,if he had stopped there the Senate could then and 
there have concurred in that recommendation, and without any 
hearing before the Senate, or before any Senate Committee. If 
that recommendation had been concurred in the office of Super¬ 
intendent- of Insurance would have become vacant upon filing 
with the Secretary of State the certificate signed by the President 
of the Senate and the Clerk. 

But, it has been-said, the Governor did not stop at this point. 
Ko, that is true, he did not stop there, but he went on a little 
further and he presented to the Senate a recital of facts and 
conditions that had existed prior to that date, and he also sent 
to the Senate the testimony of the Superintendent as taken by 
him in the Executive Chamber of this Capitol. I, for one, be¬ 
lieve that the message of the Governor contains no such charges 
or specifications that required any move to substantiate the ac- 


Address of Senator Davis. 


849 


tion upon the part of the Governor of this State; hut the coun¬ 
sel for Mr. Kelsey and a number of Senators about this circle 
would have you believe, Mr. President, that this message is in 
the form of charges. If that be true, the principal charge is that 
the Superintendent of Insurance failed to remove two officials 
'in his office who had been guilty of conduct, to say the least, 
which was very questionable and of such a character that it is 
admitted by Mr. Kelsey and by his friends and his counsel that 
they are not tit to be in the employ of the Department of In¬ 
surance, or any other department in the State; and I aid pleased 
to learn that the Senator from the Forty-third is one of those 
Senators, friendly to the Superintendent, that went to him as 
a friend and advised him to get rid of these two officials. He 
was also advised by other friends to do the same thing; so 
that he could not come before this Senate or to anybody and 
say that he did not know that the two officials referred to were 
guilty of conduct which made them unfit for the public service. 
I say he knew it, and the evidence taken before the Judiciary 
Committee shows that upon one occasion, in conversation with 
the late Governor Higgins, he stated to the Governor, or in a 
conversation between these two men, Mr. Kelsey stated that he 
would not be able to spare Mr. Vanderpoel or Mr. Hunter un¬ 
til probably the end of the year. The Governor replied that it 
would be necessary to be very cautious, but that he would trust 
to his, Mr. Kelsey’s judgment, and that he saw no objection in 
retaining them. But he did not, in any manner, Mr. President, 
assume the responsibility for the Superintendent of Insurance of 
the duty which he as said Superintendent owed to the people. 
Counsel for the Superintendent this morning in his address be¬ 
fore the Senate — and in passing permit me to say that his ap¬ 
pearance in the Senate to-day was by the courtesy of the Sen¬ 
ate and not by any right conferred by the statutes of this State 
— and he stated in relation to what he claimed to be charges, he 
said, “ Confessedly, we did not remove them;” so if Mr. Kelsey 
and his counsel and his friends desire to treat the message of 
the Governor as charges, then the testimony of 461 printed pages 
and the five or six hours taken up by counsel for Mr. Kelsey 
have left us just where we were when we started, with the charges, 
if there are any, confessedly true. Mr. Kelsey did not remove 
these two men although he was advised by his friends so to do, 
and knew full well that his duty required him to remove them. 




850 


Proceedings in Senate. 




It is unfortunate, Mr. President, that it was necessary to 
go into the long hearing and the discomfort and the heartaches, 
which have necessarily accompanied this proceeding, but per¬ 
mit me to say that it could all have been avoided if the Super¬ 
intendent had followed the advice of the Governor of this State. 
On the 31st day of January, 1907, the Superintendent of 
Insurance was invited into the office of the Executive, and 
the Governor said to Mr. Kelsey that his plan was to speak 
directly, and he didn’t feel like being mealy-mouthed, as he put it. 
Mr. Kelsey told him, “ I appreciate your direct way of dealing 
in business matters,” and he said he 'would be glad to have him 
speak frankly. “ He said that at the time I took charge of the 
Insurance Department that there was a great opportunity, and 
that I had not been equal to it; and that in his judgment the 
public demanded a different administration, and he thought 1 
should resign.” So, had the Superintendent of Insurance on 
that occasion quietly handed in his resignation all this unpleas¬ 
antness since that time would have been avoided. 

When the Governor of this State was nominated by the Repub¬ 
lican party for the office of Governor he gave the people unmis¬ 
takable pledges, and every move he has made since coming into 
his office has been along the lines of the pledges made to the 
people at that time, and I believe that the majority of this Senate 
owe it not only to the Governor of this State, but to the people 
of this State to assist the Governor in carrying out the admin¬ 
istration which he has promised, and which, I believe, if he is 
permitted to do, will be one of the best administrations this State 
has ever had. 

Senator Hill.— There is no basis for the claim or statement 
that the actions of Senators in the final disposition of the recom¬ 
mendation of the Governor, that the Superintendent of Insur¬ 
ance be removed from office, is either an indorsement or an ex¬ 
pression of disapproval of the policy of the present administration. 

That would involve the assumption that members of the Sen¬ 
ate have no right to exercise individual judgment on matters 
within the jurisdiction of the Senate, and that the Senate ought 
to surrender its constitutional functions to the dictation of the 
Executive in relation to Executive recommendations. 

Under the Constitution the Senate is a part of one of the 
three co-ordinate branches of the government, and is vested with 



Address of Senator IIill. 


851 


certain constitutional and other powers. It is required to pass 
on various Executive recommendations, and its members are 
free to exercise their individual judgment on all matters prop¬ 
erly coming before them, and they ought to be able to do this 
without encountering any unjust criticism for their conscientious 
action. Hie members of the Sepate are required under the law 
in the pending matter to exercise their best judgment on the 
recolnmendation of the Governor, and all the facts presented in 
connection therewith, and under the law and the Constitution 
the action ol Senators ought to be a matter of indifference to 
the Executive where there are grounds for an honest difference 
of opinion and especially so when, as in the pending matter, the 
Senate is acting in a quasi-judicial capacity; otherwise, the func¬ 
tions of the Senate would be subordinated to the domination of the 
Executive and its members in the exercise of their constitutional 
powers would hesitate to incur his displeasure. 

I cannot believe that our worthy Executive woilld have any 
Senator surrender his individual judgment, or that he would 
place in the category of his opponents anyone who may honestly 
differ with him on the Ivelsev matter. 

c/ 

Since the recommendation of the Governor on Februarv 20th, 
1907, was presented to the Senate, much evidence has been taken, 
and an entirely different situation presents itself now from that 
known to the Governor when this message was presented to the 
Senate. The testimony and documents in the Kelsey case fill 
a volume of 650 printed pages, showing the character, the 
extent and the diversity of the duties performed by Superin¬ 
tendent Kelsey from the time of his induction into office from 
May 17, 1906, to February 20, 1907. No one can peruse that 
evidence and give it fair consideration without reaching the con¬ 
clusion that Superintendent Kelsey performed an amount or vol¬ 
ume of work rarely done by any other State officer in an equal 
length of time. Furthermore, there devolved upon him in ad¬ 
ministering the new insurance laws of 1906, and in adjusting 
the multitudinous claims growing out of the losses consequent 
upon the San Francisco fire disaster, duties far more onerous 
than ever fell to the lot of any other Superintendent of Insurance. 

The Governor’s message states that undoubtedly the work of 
the Department has been onerous and has required a large ex¬ 
penditure of time and thought, and he does not charge against 
the Superintendent that he has failed in the performance of 







852 


PROCEEDINGS IN SENATE. 


any of these duties, for he says that he does not impugn Mr. Kel¬ 
sey's integrity. 

The burden of the complaint is in effect that Superintendent 
Kelsey did not immediately after he assumed office remove two 
subordinates in the Insurance Department,, and also that the 
Superintendent lacks initiative. The evidence shows that the 
Superintendent conferred with Governor Higgins, with reference 
to these two subordinates, and that during the pressure of busi¬ 
ness consequent upon the San Francisco fire losses and the ad¬ 
ministration of the new insurance laws enacted in 1906, it 
was thought best by the Superintendent, and not disapproved 
by the Governor, that the services of these two subordinates should 
be continued for the time being. That may have been an error 
in judgment which was due to the extraordinary volume of busi¬ 
ness thrown upon the Department for the reasons above stated. 

The evidence does not show that there has been anv dereliction 
of duty in administering the new insurance laws, or in performing 
any other duties connected with that Department since Mr. Kel¬ 
sey assumed control. The work was so pressing that there was 
little time for the Superintendent to be casting about for new 
ways and means in which to spend his time and waste his energies; 
but the evidence does show that he inaugurated an entirely new 
policy with reference to the conduct of the industrial insurance 
business which put out of business a score or more of companies 
of doubtful solvency that had been doing business in this State. 

From all the information bbfore the Senate it does not appear 
to me that the facts justify the summary removal of Otto Kelsey 
from the office of Superintendent of Insurance. He is a man of> 
spotless integrity and has served the people of this State for a 
decade or more in positions of responsibility with a fidelity rarely 
exhibited by any public official. 

This is a case where the Senate may properly non-concur in the 
recommendations of the Governor and do so without impairing 
the efficiency of the splendid administration of our worthy 
Governor. 

Hone of us desire to incur the displeasure of the Executive or 
■o invite the unfriendly criticism of the public press; but we have 
a duty to perform toward Mr. Kelsey as well as toward the people 
of the State, and it is not becoming in us to shrink from that 
duty. In the words of Chief Justice Marshall, in a celebrated 
case, let me say: “ Ho man is desirous of placing himself in 


Address of Senator Raines. 


853 


a disagreeable situation. No man is desirous of becoming the 
peculiar subject of calumny. No man. might he let the bitter 
cup pass from him without self-reproach, would drain it to the 
bottom. But if he ‘has no choice in the case; if there is no alter¬ 
native presented to him but a dereliction of duty, or the appro- 
brium of those who are denominated the world, he merits the 
contempt as well as the indignation of his country who can 
hesitate which to embrace.” 

In my judgment the evidence is insufficient to warrant the 
Senate in- exercising its extraordinary power of removal of the 
Superintendent of Insurance from office and it is my duty to vote 
against such removal. 

Mr. Pr esidcnt, I have known the Honorable Otto Kelsey since 
the year 1896. I served with him in the Assembly for five years 
and during a part of that time on some of.its most important 
committees. I have known him in his official positions since my 
retirement from the Assemblv. I have seen him in all the stress, 
strain and trial of arduous legislative and departmental work, only 
to admire his calm, judicial bearing and his spotless integrity. 

As temporary speaker of the Assembly during the illness of 
Speaker Nixon he won the admiration of all the members of that 
body, and as Comptroller of tin 1 State of New York he dis¬ 
played rare executive ability. Hitherto he has proven himself 
a faithful public official and in the new and arduous position as 
Superintendent of Insurance he will undoubtedly attain the high 
standard which has characterized all his previous official life. The 
State needs the service of such men and in the absence of evidence 
showing dereliction of duty,malfeasance in office, or other disquali¬ 
fying circumstances, it is my duty to vote against.his removal. 

Senator Raines.— Mr. President, even if the matters involved 
in this controversy had not been so thoroughly traversed by the. 
Senators who have so ably addressed themselves to this question, 
•the lateness of the hour alone would lead me to make my remarks 
as brief as possible. 

The summing up of the counsel before this Senate, the speeches 
of other Senators in advocacy of the case of Otto Kelsey in reply 
to the arguments of Senators on the other side of the question, 
have so covered the ground that I think I need add but little of 
argument to what has been advanced by them. 


854 


PROCEEDINGS IN SENATE. 


There are some things-to which I'wish to call attention which 
perhaps are a little extraneous, a little outside of the important 
controversy before this body. 

The rights and duties of Senators have been often alluded to 
by all the speakers; but I want to quote from the remarks of a 
gentleman so long in public life and so high in the estimation of 
the people that, what he said should have some weight. “ Is a 
Senator a mere agent ? ” In the discussion of that he says that 
running through all this contention there is found another broad 
and important question: “What is the office of a Senator? Is 
he a mere agent to register the will of somebody else, or is he 
supposed to have opinions of his own, with liberty to stand for 
them in debate and when he votes. Anybody could follow some¬ 
body else; and why, if a Senator had no liberty of action should 
he be held accountable for the record he makes; and, if there is 
to be no difference of opinion, why have any discussion, or, in 
fact, why have any Senate or House? 

“ I have always understood and believed that the representa¬ 
tives of the people are accountable only to the people; and that 
they are not properly subject to any other influence; and for 
that reason I stand ever ready to render to my constituents an 
account of my stewardship.” (I trust every Senator about this 
circle stands in the same position.) “ It is their right to have it; 
it is my duty to give it and if they are dissatisfied they have a 
remedy for that dissatisfaction in their own hands. They can 
select another man, but while conceding the right of everybody 
else to differ from me I deny the right of anybody except my 
constituents to call me to account. I have never held any office 
except by election. I have always been proud of the confidence 
in me so frequently manifested by the intelligent people of this 
great commonwealth. I have been always ready to stand by their 
judgment, and therefore I propose to carry my cause directly to 
them whenever issues may arise in which they are interested'. If 
they are pleased I shall be pleased; and if not, I shall be satisfied.” 

There are gentlemen in the State of Hew York, who do not 
agree with this proposition, and it is not remarkable that they 
have come to the front, so numerously in this controversy. We 
have had or did have immediatetly after the examination of Mr. 
Kelsey before the Governor, a second trial by the newspapers. 
There seems to have been on the part of many of them the 
adoption of a motion to' “ Reconsider their action ” and to-day 


Address of Senator Baines. 


855 


those who were the loudest in the support of the Governor in 
this matter have but little if anything to say on the question. 
Gut I hold in my hands an editorial from a metropolitan journal, 
of recent date, which cannot, lor some reason or other, give up 
the idea that a Senator is the agent of a metropolitan news¬ 
paper. It cannot get rid of the idea that lie has no right to have 
a judgment of his own and to exercise it; and even in this case, 
which takes on the form of a trial in court by a jury, this news¬ 
paper assumes a right to command the verdict of the jury, and 
this paper is but one of many. 

I have in my hand an extract from the Hew York Press of 
April 16th, only a few days ago, in which, after various left- 
handed compliments to various Senators about this circle — which 
would make them too'proud if 1 should read them, and which, 
therefore, I will pass by —• it says: “ But meanwhile we suggest 
that Pepublican voters send a few messages to the Senate in¬ 
forming the members what they are expected to do by those who 
elected Governor Hughes, and who are going to see that his pro¬ 
gramme is carried out. Send letters and telegrams to John 
Baines, Leader of the Senate, addressing them to him at the 
Senate Chamber, Albany. Make your meaning clear. Use plain 
English. Despatch them now.” 

That paper has a wide circulation in the city of Hew York and 
throughout the State, and as a result of that editorial and that 
advice to the people and to the friends of Governor Hughes, I 
have received one telegram. It is from Hew York City. It was 
evidently sent on the impulse of the moment for it is dated the 
16th, the day the paper printed the editorial, or probably the 
gentleman would have reconsidered. It reads as follows: 

“ Dust Kelsey for your own reputation and the public wel¬ 
fare.” Signed “ Spidell.” 

I hope “ Spidell ” will not hereafter be unknown to fame, 

I have also received a letter. This is from somebody who is 
supposed to manage the estate of W illiam H. W hitehouse. It 
says: u Hon. John Baines, Senator, &c., Albany, Hew York”— 
mark the “ Senator, &c.”—“ My dear Sir: May the curse of the 
Almighty God rest upon you and upon your associates for con¬ 
spiring together to spoil the just endeavors of his servant the 
Governor of the State of Hew York/ Let the hosts of all Heaven 
and the hosts of earth and the hosts of hell bear solemn witness to 
my hand and seal.— Amen — So let it be. Yours very respect¬ 
fully.” - 




856 


Proceedings in Senate. 


I do not believe I will read the name because it is more 
jirobable that the man who wrote that letter comes as near being 
non compos mentis as the man who wrote the editorial. 

But not only have the Senators been getting advice, but the 
Governor also has been getting advice on this question. I think 
he told us about the time of his inauguration that his greatest 
trouble and burden had been to listen to the advice of the people 
who thought they knew just what he ought to do, and how the 
government of the State of New York should be run by him as a 
reformer. A certain gentleman in New York made a public 
utterance at Cooper Institute I think it was. At any rate we have 
a full report of his speech, which occupies one or more columns. 
This gentleman was once honored by a nomination on the Re¬ 
publican ticket in New York as candidate for Mayor of that great 
city. He was placed as a result among those who, according to 
racing parlance, “ also rand 7 His name is William M. Ivins. 
But this is what he says — I leave out something he said as to 
some proposition of the Governor, because my friend from the 
Porty-sixth would not agree with Ivins on this proposition any 
more than he will with the Governor — but he says this to the 

t/ 

Governor, and I wish the Senators w^ould take particular notice 
of it, because this is advice from a “ reformer ; 77 a way-up-above- 
the-stars-sort-of-fellow; a genuine reformer, who tears the motto 
“ God Bless Our Home”* off the wall, and hangs up “Reform 
Pays, It Is a Cinch. 77 He says this: 

“ I will tell you what I would do if I was the Governor 77 — 
I wonder if he shook hands with himself then and thought there 
was a prospect of having an opportunity of doing something as 
the successor of Governor Hughes — “I will tell you what I would 
do if I was the Governor, in regard to Mr. Raines. I would say 
to him, ‘ You represent a Senate District of 80,000 people. 7 77 — 
Well, that is about as near as Ivins ever got to the truth, and that 
is within 20,000 of it.—- “A little district with only 80,000 peo¬ 
ple, they are your constituents; but I represent a district contain¬ 
ing 1,200,000 voters. They are my constituents. You don’t get 
one single bill signed for your constituents until mine are taken 
care of. You won’t get a single bill signed until the ballot reform 
measure, the Public Utilities Bill and the bill for a recount shall 
have been properly considered by the Legislature. Until these 
measures shall have been passed I shall not be prepared to take 
up local questions. I shall have no time to do so, for the life 




857 


Address of Senator Raines. 

of the whole State is of vastly greater importance than the interest 
of any rural district.” 

So, Mr. Ivins, if he were Governor, notwithstanding the rights 
of Senators, and their responsibility, would coerce every Senator 
to his views, as far as might be possible, by using the u big stick;” 
and he has so much respect and confidence in Governor Hughes 
that he expects the Governor will accept such advice as that. 

Mow’, I w r ant to say for the benefit of Mr. Ivins and for the 
benefit of my Republican and Democratic associates that I do not 
take Governor Hughes to be that kind of a man. When Governor 
Hughes uses big sticks and tries to force the consciences of mem¬ 
bers of the Legislature on this or any other question, you can see 
the end of Governor Hughes; and you won’t see the end of Gov¬ 
ernor Hughes by reason of any such action on his part with regard 
to this Legislature. 

That is my opinion of Governor Hughes, and although the 
newspapers have exploited far and wide that I have attacked the 
Governor and his policies, and that I have broken with the Gov¬ 
ernor, and he has thrown me out of his office, I yet have the 
privilege of entry to the Governor’s office and of a fair discussion 
on any question that I may have an interest in. And I expect to 
have that until the end of my term at least, notwithstanding any 
vote I may cast on this question in this Senate. 

Mow r having disposed of these extraneous matters and expressed 
my views of the Republican Governor of this State as to his policy 
in the treatment of members of this Legislature wdio even do not 
agree with him in everything—as the Senator from the Forty- 
sixth §ays he cannot — I wdll say that he is my Governor; he is 
the Republican Governor of this State; he is the man for whom 
my ovm County gave a greater majority than it ever gave for any 
candidate, state or national, in its history. So I am not here to 
antagonize Governor Hughes. Rut I am here to do to-night what 
I believe to be right and my duty as a man and as a Senator rep¬ 
resenting my district; and I shall be ready to settle with the peo¬ 
ple of my district at any time they wish to settle with me and to 
take any verdict they may see fit to pass upon my action in-this 
or any other particular. 

Mow 7 , it is not necessary for me after the speeches that have 
been made to review the career of the Superintendent of In¬ 
surance. You know what that history has been up to the time of 
his appointment, and since; but I want to call your attention to 



) 



858 


Proceedings in Senate. 


one thing: It is only a short time since the funeral train from 
this Capitol went across the State to the funeral of Frank Way- 
land Higgins, the late Governor of this State. It is only a short 
time since in yonder chamber (Assembly chamber) the Governor 
of this State and one of the most eloquent educators of this State 
uttered their eulogiums upon the life, the character and the work 
of Frank W. Higgins. He was, indeed, “A knight without fear 
and without reproach; ” and one of the acts which he performed 
during his career as an Executive was the selection of Otto Kelsey 
to be Superintendent of the Department of Insurance. He had 
known Otto Kelsey for fourteen years. He had been intimately 
associated with him, and as he said himself, he knew “ he was a 
man who could keep both feet on the ground; ” and after looking 
through the whole State in that emergency which had come upon 
the people owing to the weakness and wickedness of the managers 
of great insurance corporations, he placed Otto Kelsey at the helm 
to direct that Department. 

But, do you say Frank Wayland Higgins was not a competent 
judge of the man or of the character of the man he knew so well ? 
Let me call attention to one fact: I have seen it stated in the 
papers over and over again — and when it is stated in one paper 
it goes through the State — that “ the present Superintendent of 
Public Works was the God-father, the discoverer of the present 
Governor of the State of Hew York.” He, the discoverer of the 
present Governor of the State of Hew York! When Charles E. 
Hughes was selected as the attorney of the Committee,— of which 
the Senator from the Nineteenth, if he had had his just dues, 
should have been Chairman, and which, through his own generos¬ 
ity and the recognition of the supposed necessities of the 7 public 
service, that Senator relinquished in favor of another,— the Su¬ 
perintendent of Public Works had no dream of claiming the 
honor of that selection. The man who made Charles Evans 
Hughes the counsel of that Committee and launched him on his 
honorable public career was the Governor of the State of New 
York, Frank Way] and Higgins, and that on the suggestion of a - 
man who had known him for years, his own counsel, Cuthbert 

W. Pound. v vvj 

The Superintendent of Public Works might have thought that 
as a result of being Chairman of that Investigating Committee, he 
would he Governor of the State of New York, for which position 
he was last year a candidate. Well, he is for some reason or other 
the Superintendent of Public Works; but if the time should ever 






Address of Senator Baines. 859 

come when his interests run counter to the interests of the Gov¬ 
ernor who made him Superintendent of Public Works, no rat 
would leave a sinking ship quicker than he would abandon Charles 
Evans Hughes. 

How, when it comes to the selection of a counsel for the In¬ 
surance Committee, the Senator from the Eorty-sixth knows with 
whom he then consulted as to who was the best man to select for 
counsel of the Insurance Committee. lie can tell if he wishes 
to. I know something about it. But as a result, I want to call 
attention to the fact that the man who selected Otto Kelsey for 
Superintendent of this Department, one of the most level-headed, 
conscientious, able public servants the State ever had, was also 
the man who selected Charles E. Hughes and made it possible for 
him to come prominently before the people. He was appointed 
for the purpose of an investigation 'into conditions which were 
confessedly rotten in the large life insurance companies of the 
city of Hew York, and as a result of that investigation there were 
to be laws suggested by the Committee, and to be passed by the 
Legislature; and that Committee came back with those laws, and 
they were passed, and I am not going to stop to-night to discuss 
them. But I want to call the attention of my friend, the Senator 
from the Eorty-sixth, and others to the fact that while great good 
will ultimately come from the passage of those laws and their en¬ 
forcement by Otto Kelsey, if he continues in office, as has been 
demonstrated by things already accomplished, there was some 
little damage done at the time by that investigation, though not 
enough to balance the good that will result. 

Eor instance, take the case of the Equitable and the Mutual 
from December 31, 1902, to December 31, 1904, there was an 
increase in insurance in the Equitable of $203,296,297, and in 
the Mutual of $206,863,001; and a total increase in that time, 
and that is before this investigation began, of $374,981,282. But 
following — just preceding and following that investigation and 
as a result, which I do not say was necessary, there was created 
such an alarm among policyholders that the Equitable from 1904 
to 1906 decreased $118,866,523 ; and the Mutual $30,354,480. It 
is possible that had there been somebody with as level a head as 
Otto Kelsey to advise, that in some way the investigation might 
have been so conducted that these immense losses to the families 
of the policyholders — in whom my friend from the Forty-fourth 
and all of us are so greatly interested — might have been avoided, 




860 


Proceedings in Senate. 


at least to a considerable extent. I only say, there was a result of 
the situation. But the investigation was concluded, and the bills 
were passed, and I voted for every one of them and stood by them 
even to a clause in one which was an absolute blow at the insur¬ 
ance interests of the State of New York and in favor of the in¬ 
surance interests of other states, believing on the whole that 
the judgment of the Committee was good. I know who selected 
that Committee and how it came to have appointed as its able 
Chairman, my friend, from the Forty-sixth. 

But I and nearly every Republican Senator stood by and passed 
those laws, and they were put into the hands of Otto Kelsey for 
execution. 

Now, then, from the time of Otto Kelsey’s appointment to a 
certain day, excepting complaints from a policyholders association 
which was trying to get control of two of these companies, there 
was not a complaint worthy of attention from any responsible 
source in the State in regard to the administration of Otto Kelsey; 
and so we entered upon this legislative year, when suddenly, as 
from a masked battery, was fired a shot which has been heard 
through the State of New York, if not around the world. 

The man was carrying out the provisions of the Armstrong Law, 
and the Senator from the Forty-sixth knows what an herculean 
task was imposed upon him in doing it; and not only was he carrv- 
' ing this burden, but he had also thrown upon him at that time the 
San Francisco situation which has been discussed to-night, and 
which I need not take time to go over, except that I am going to 
call attention to one document which nobody has read, which even 
Mr. Kelsey’s counsel was so hurried that he did not get to, but 
which in my judgment is one of the important features in this 
testimony. It is worth reading.- It is important enough for me 
to call the attention of every Senator to it, so I will read it in full. 
It is the statement of men who knew the situation, knew what 
Mr. Kelsey accomplished, and who do not fear to give honor where 
honor is due. 

“ The San Francisco fire, which occurred on April 18, 1906, 
produced a situation of extraordinary gravity. 

“At first, there w r as great confusion and uncertainty in regard 
to the nature and extent of losses sustained or the amount of in¬ 
surance carried on property destroyed. This was due to the 
loss of records and papers and the impossibility of readily obtain¬ 
ing the percentage of loss and of salvage; the value of re-insurance 






Address of Senator Raines. 


861 


and the legal liability of the companies affected, could not at 
first be accurately determined, but only approximated. 

This condition was a matter of very serious concern and pro¬ 
duced in the public mind great uncertainty as to the solvency of 
the ^ ei v many companies which heretofore had been regarded 
as sound and solvent, 

-The enormous amount of credits based upon the business of 
these companies, amounting in the aggregate to not less than eight 
hundred millions dollars in Few York city, and upwards of five 
billions of dollars in the country at large, made it of the very 
highest importance — indeed created an imperative condition — 
for the exercise of sound judgment and conservative action in 
handling the situation. 

“ Rumors of all kinds were current, and articles were appear¬ 
ing in various newspapers tending to weaken public confidence; 
and, in brief, the situation was the most critical in fire insurance 
matters which has occurred in the history of this country.” 

And right here, I call the attention of the Senators to the fact 
that one of the great companies in this State issued documents 
which called attention %to the fact that it was impossible to tell 
whether any of the companies doing business in San Francisco 
were sound or not, but that this particular company was all right 
and was prepared to take up insurance; and it was the man Moore, 
acting in the interest of the Continental Insurance Company, who 
called out the reply from Otto Kelsey which insurance men have 
told us “ stamped Otto Kelsey as one of the safest men in public 
affairs that they ever knew.” 

It continues: 

“ Hasty and ill-considered action would easily have precipitated 
a panic in which sound and solvent insurance companies here and 
abroad would have been forced to great losses by the sacrifice of 
securities, and many of them forced into the hands of receivers; 
and inevitably would have affected other business interests de¬ 
pendent upon the stability of fire insurance companies.” 

“ The course, therefore, of the Insurance Department of the 
State of Few York was a matter of the highest importance to 
the fire insurance companies and their policyholders, not 6nly 
throughout this country, but in foreign countries whose companies 
were doing business under the provisions of the laws of the State 
of Hew York. 

“ We are familiar with the course adopted by the Hon. Otto 
Kelsey, Superintendent of Insurance. 


862 


Proceedings in Senate. 


“ This course required the sworn reports of the insurance com¬ 
panies under his jurisdiction in regard to various data, such 
as losses, salvage and re-insurance. In addition thereto, we know 
that Deputy Robert II. Hunter or Chief Examiner Isaac Vander- 
poel, or both, made inquiries and sought information constantly 
from the responsible officers of fire insurance corporations as to 
the situation generally and as to facts bearing upon or relating to 
the condition of particular companies. 

“ In our opinion it would have been impossible to bring the fire 
insurance situation to a successful outcome if anv other course 
had been pursued. It required the greatest efforts on the part of 
the fire insurance companies to obtain for themselves approxi¬ 
mately correct estimates of losses, salvage and re-insurance and 
other data, and even then there were many open and disputed 
questions as to liability. An examination as permitted by statute 
of the companies affected by the San Francisco fire would have 
been impracticable because of the impossibility of such examina¬ 
tions in less than a long period of time, and such examinations 
would not have thrown any better light upon the situation than 
the sworn reports required by the Insurance Department because 
of the lack of information above stated as to losses, salvage and 
the value of re-insurance and of outstanding questions of law 
and fact as to liability. 

“ What the situation demanded was constant information ob¬ 
tainable from the fire insurance company officials and other re¬ 
liable sources and constant inquiry of them, which inquiry was 
• made and information given, so far as the fire insurance com¬ 
panies were concerned, to the Superintendent of Insurance 
through Mr. Hunter or Mr. Vanderpoel, or both. The direction 
and requirement of the Superintendent of Insurance as to the 
sworn reports resulted in giving to the Superintendent of In¬ 
surance the information possessed by the insurance companies 
themselves as the situation developed, and as from time to time 
the insurance companies provided for the liquidation of ascer¬ 
tained losses. 

“ Pursuant to the policy of the Insurance Department and in 
obedience thereto, large sums of money were paid into the 
treasuries of the fire insurance companies, and this policy had the 
effect of protecting the policyholders and the credit of the com¬ 
panies and saved many of them as solvent going concerns, whereby 
losses have been and can be met, and have been adjusted or are. 
in process of legitimate adjustment. 


i 


863 


Address of Senator Raines. 

O' 

“ upwards of eighty millions of dollars fresh capital 

have gone into the treasuries of various lire insurance companies 
here and abroad, and only one company of this State has been 
placed in the hands of a receiver. 

u During the whole of this period the Superintendent of In¬ 
surance exhibited complete and comprehensive grasp of this 
grave and anxious situation, and we have no hesitancy in affirm¬ 
ing that, owing to his sound judgment, tact and business sense, 
an extraordinary and critical period was safely passed and a panic 
; averted. 

“From our knowledge of the conditions resulting from the 
San Fransisco fire and our knowledge of the manner in which the N 
Insurance Department dealt with the same under the superin¬ 
tendency of Mr. Kelsey, we bear testimony to the fact that he 
acted in such manner as accrued in the highest measure to the 
benefit of the business world at large and to the credit and honor 
of the State of Hew York.” 

That paper is signed by thirty-five or forty officers of insurance 
companies in the city of Hew York and elsewhere. During that 
time he was making use of Mr. Hunter and Mr. Vanderpoel, and 
the Governor of this State overlooking this situation, not having 
considered the situation, thinks he should have dispensed with 
their services, and, to use a simile which I do not care to have 
in any sense considered as a reflection upon Mr. Hunter or upon 
Mr. Vanderpoel, that he should have spent his time in chasing 
a couple of rats out of his barn, though while doing so he let the 
whole barn burn. 

Otto Kelsey knew what he was doing. He knows that as a 
result of the Armstrong investigation, the officers of life insurance 
companies were all trying to be very, very good; and as far as 
we know they are trying to be good to this day; and especially 
were those two men trying to be good who had been smirched in 
that investigation. There were no two men who wanted to be 
better men in the eyes of Otto Kelsey than did those two gentle¬ 
men; and so I say he was warranted in retaining them in that 
great emergency. He knew enough not to clean house in zero 

WCRtllGr 

But he took advice. He laid the whole- situation before the 
Governor of this State, Frank W. Higgins, with whom he con¬ 
sulted continually, and under his advice, with his consent, he 
retained those men through that crisis; and now, though the two 


) 


864 . Proceedings in Senate. 

men are no longer connected witli the Insurance Department, and 
though nothing has transpired in the insurance world to throw a 
scintilla of smirch of any kind upon the conduct of the Depart¬ 
ment by Otto Kelsey, and no complaint had come> from any 
source, unless it is hied in the archives of the Governor of this - 
State from those interests which wanted to break into the situa¬ 
tion and obtain control of these great corporations, you are asked 
to remove Otto Kelsey for what was done by two men before 
he went into office, and whom he retained with the advice and by 
the consent of Prank W. Higgins, the man whose judgment was 
so good that he really put Charles E. Hughes in line to become 
the Governor of the State of Hew York. 

How, is there any justice in that, my friends ? Is it a fair and 
square deal ? Is it a square deal that for something which hap¬ 
pened before he went into office, or for what he did with regard 
to these two men, from which no damage to any interest has 
resulted; for what he did with the approval of Frank AY. Higgins, 
of whose ability and conscientious discharge of public duty the 
Governor had said so much — is it a fair, square deal that on 
that anv Senator should vote to remove Otto Kelsey from office ? 

t/ V 

Tell me, Senator from the Forty-sixth — and for you I have 
the greatest respect, and a thorough appreciation of your abilities 
which were manifested wdiile you were at the head of that Com- 
mittee, as well as before and since — tell me Senator from the 
Forty-sixth, what has happened in the insurance world since Otto 
Kelsey has taken charge of the Insurance Department of this 
State that would warrant a charge against him of incompetency 
or inefficiency ? There is not a word from any source. The only 
complaint has been this which we have been considering, the only 
charges against the Insurance Superintendent of the State of Hew 
York during his administration of this Department, or in the 
fourteen years of his public life, are these which have been 
disproved. 

The Senator from the nineteenth and the Senator from the 
Forty-sixth are correct in this, that the Governor had the right to 
say to us I recommend the removal of Mr. Kelsey from office, 
without giving a solitary reason; and that it is in our power to 
concur in that recommendation without giving a reason. But in 
this case the Governor saw that to arbitrarily remove Otto Kelsey 
without assigning a reason would have lessened the confidence 
which the people have in the Governor of the State, and so charges 




Address of Senator Raines. 


865 


were made, and the charges have been tried, and as I believe on 
my conscience with the result of showing the Governor was mis¬ 
taken* even the Senator from the Eighth, who will vote for re¬ 
moval, says that the testimony taken by the Senate Judiciary 
Committee disproves the charges made by the Governor, and that 
he bases his vote upon the examination before the Governor. And 
the Senator from the Forty-sixth says that the answers of Otto 
Kelsey were a confession from start to finish. 

Senator [addressing Senator Armstrong], if you will read that 
again you will see that from start to finish it was a simple, square 
statement of facts, and the answers were not excuses. They were 
statements of facts, and I could read page after page to show they 
were simple statements of fact from the Insurance Superintendent. 

When he got before the Committee he then gave his reasons; 
and as the Senator from the Eighth says: “ Throw that first 
examination out of the case and there is not a scintilla of evidence 
to show that Otto Kelsey should be removed as Superintendent 
of Insurance.” 

Mr. President, I have spoken longer than I expected to. There 
is any amount of material. 1 had enough for half a day, but 
others have reviewed the evidence. The ground has been well 
covered, and we should get to a vote; and I hope every Senator 
will vote as his conscience dictates, without being influenced by 
the hope of reward or the fear of punishment. Right here and 
now I challenge any Senator on this floor who will vote for the 
removal of Otto Kelsey to say that he has had the slightest intima¬ 
tion from me that I desired him to vote one way or the other. If 
he has it to say let him stand up now and say it, or forever after 
hold his peace. 

I have been told that there were men who were under such 
obligations to me that if I laid it down to them I could save this 
case. In any event, I have refused to do it. Some people believe 
in winning out in a hard fight in which they get interested, no 
matter what the means used to do so; but I have not seen my way 
clear in the honored position which you have given me to try to 
bring any pressure upon any Senator about this circle to act other 
than in accordance with his convictions of right and justice. I 
have with others been insistent for, and thank God we have won 
out on the proposition,'that Otto Kelsey should have a fair show 
before this Senate on this examination to justify himself. 

Row, Senators, I regret that there has been occasion for this 

28 


8 CG 


Proceedings in Senate. 


controversy, and as far as I am concerned, I am through with this 
question, except to cast my vote; and I wish I had a majority 
vote in my hand now to cast in favor of Otto Kelsey. 

Senator Saxe.— Mr. President, 1 should like to have my name 
called lirst as I have a death in my family and desire to leave for 
New York on the first train. 

Senator Paines.—1 have no objection to the Senator being re¬ 
corded first on the roll call so that he can leave. 

The Presidents— The question is: Shall the Senate concur in 
the recommendation of the Governor for the removal of Otto Kel¬ 
sey from the oiiiee of Superintendent of Insurance. 

Senator Armstrong.— Py consenting to the call of the name of 
the Senator from the Eighteenth at this time, 1 do not wish to 
waive the right to move a call of the Senate if it should be deemed 
necessary after his name has been called. ’ 

The President.— The Clerk will call the name of the Senator 
from the Eighteenth. 

The Clerk.— Senator Saxe. 

Senator Saxe.— Mr. President, I desire to he excused from 
voting just to make a brief statement. 

All through this proceeding I have taken the position that in 
this matter in my opinion the Senate is in the position of a board 
of directors toward the president of a corporation. It is the case 
of a president who has just been elected to change the business 
policy of a corporation; and with that president there was elected 
a board of directors to carry out the views of the stockholders. 
Now, I refer by the president to the Governor, who is elected by 
the stockholders, the people; and so the Senate was elected by the 
stockholders, the people, as a board of directors to perform their 
duty. That president was elected to obtain certain results for 
the people that they desired, and it was expected from the board 
of directors, the Senate, that it would support him in his object 
to obtain those reforms for which he was elected. ' 

As far as section 22 of the Public Officers Act is concerned, 
in this illustration it is like a by-law under which the board of 
directors shall act. After the lucid explanation of the Senator 
from the Thirty-ninth, it seems to be conceded that we have the 
power simply to concur with the recommendation of the Governor. 

The president of this company says tve have a man at the 
head of a department that is not the man that I want there to 
get the results that the stockholders expect of me, and I call upon 



Address of Senator Ai/lds. 


8G7 


vod, gentlemen of the directorate, to removed this man so that 
I can put in his place a man who will get the results I am ex¬ 
pected to obtain for the stockholders. 

A oav, Mr. President, I honestly believe in my own conscience 
that the Governor is wholly honest in his endeavors to obtain the 
results expected of him* and lor those reasons I am supporting 
him in this proceeding; and I do no violence to my conscience 
in so doing. I believe I respect my highest duty in following 
that course. 

I therefore withdraw my request to be excused from voting and 
ask to be recorded in the affirmative. 

Senator Armstrong.— I move a call of the Senate,' and ask that 
the roll may be called to ascertain whether there be any absentees.- 

(The Clerk announced as the result of the call: All present 
but Mr. Saxe who has voted and is excused.) 


OAT POLL CALL. 


Senator Allds.— I ask to be excused from voting in order to 
explain my reasons. It does not occur to me at this late hour- 
that there is any 'necessity for a discussion of this case, and yet 
at the same time one may be pardoned for a moment for express¬ 
ing the views which he holds as to what is the proper action to be 
taken in this case. 

To differ with the Governor of the State upon a recommendation 
which he has made is not a pleasant thing to any Senator who is 
of the same political faith; and yet at the same time I want to 
point out to my friend from the Thirty-ninth that he quite cor¬ 
rectly stated the law:—The Governor had the power to make the 
recommendation and it is quite true that this Senate had the right 
to remove without any hearing; except for one thing that dwells 
within the -breast of every man born of Anglo-Saxon parentage 
or who as a good American citizen has become imbued with the 
fundamentals of American institutions and its government. Ao- 
body, no matter what his parentage may be, from the days of 
Charles and James down to the present, but knows there has 
always been the feeling that there was an inherent right to a trial 
by a jury. It is inbi'ed within us, and that is the limitation we 
should all feel; namely, that while we had under the law the 
power to do this, we could not without violence to our own good 
conscience do that without a hearing. For that reason, we 





868 


Proceedings in Senate. 


gave to this man of peerless character that which was his 
right — a hearing; and the evidence when taken and pre¬ 
sented to this Senate, justified the action in the Senate in giving 
him a hearing, in my humble judgment, because it showed that 
the Governor in making the recommendation, like the Chairman 
of the Armstrong Committee in the attitude that he took in deny¬ 
ing to him, if he could, a hearing, took only a narrow view of 
the insurance world. They were limited by their personal environ¬ 
ment in thinking that only life insurance was a matter of in¬ 
terest to the State of New York; and while it is to the credit of 
the State of New York that through wise laws this State stands 
pre-eminent in life insurance, it is likewise true that it stands 
pre-eminent in its management of fire insurance, and in my 
humble judgment if the thing had been investigated as to whether 
that man had discharged his full duty to both branches of his 
department, the recommendation received in the Senate on the 
20th day of February would never have been made. 

Talk about the right to remove the Superintendent of Public 
Works—it is recognized in the statute that it is a personal ap¬ 
pointment and stands alone as the one case where he may do it 
without any reference to the Senate. . But when it comes to these 
other officers, gentlemen, the initiative must come from the Gov¬ 
ernor, and the men around this circle might as well recognize that 
the power to remove rests in the fifty-one men seated around this 
circle, as to whether in their good conscience it should be done. 

The Senator from the Forty-sixth talks about a square peg 
in a round hole. Let me ask who made the round hole ? The 
Armstrong Committee did; if there is a round hole there they 
made it. That man is a square peg; known by all the men 
throughout the length and the breadth of this State to be such a 
man. I want to say to you that having lived four years with him 
before I come to the Senate, I think I know something of the 
man; and there never was a time that he did not size-up in what¬ 
ever position you found him to the full limit of the occasion. 

Otto Kelsey lacking in initiative! Lacking in capacity! 
There is no man who has ever served with him who does not know 
that at every and all times he measured up to the fullest degree 
and was never lacking either in capacity or capability or initiative. 

Gentlemen, this man was elected by the people of this State 
to an office which is second only to that of Governor, by a majority 
of 137,000; and he surrendered that office at the request of Gover- 




Address of Senator Allds. 8G9 

nor Higgins, because in the judgment of Frank Way]and Higgins 
he was the man who was best fitted to step into a most trying posi¬ 
tion and carry the burdens. A man who has received that ap¬ 
proval from the people of the State of New \ r ork is not entitled 
to be lightly told that he lacks grasp and initiative, and therefore 
should be relegated to private life. 

Look if you will at the situation. At all times he consulted 
with the man who had asked him to give up the high office of 
Comptroller, and I notice that when the fire insurance situation 
was finally handled and settled that the Governor writes this 
letter, and this closes the matter. “ Enclosed please find letter 
from our friend Moore who continues to be in a critical frame 
of mind. I send it for your information but do not believe a 
reply is necessary.” I read it for that last closing sentence: 
u He does not believe a reply is necessary.” 

There is the approval of the man who appointed him. Loyal 
always to his chief, what was- his next act as far as his relations 
with the present Governor are concerned ? On the 2nd day of 
January, 1907, he sends a respectful message to the Governor 
stating that he would be happy at any time indicated by the 
Governor to confer with him as to the Department and his policy. 
Loyal to the man, who asked him to take up the burden, and 
then the minute that there was a new chief who held a warrant 
from the people, he recognized his obligation to that man and 
said: “I am at your disposal.” And what is the reply? It is a 
letter saying he would be glad to consult with him when some 
pressing matters are over; and the next is a request for an inter¬ 
view in which within five minutes he tells him that he does not 
size-up to the situation, and he wants his resignation. I want 
to suggest to you gentlemen as to whether that is fair and 
righteous treatment of a man who for fourteen years has been in 
the public service and never found wanting once, responsive 
always to his duty? There is not a man around this whole wide 
circle that does not believe he discharges his duty every time; and 
that is the man we are asked upon this recommendation to remove. 

Mr. President, I have known Otto Xelsev for many a year. 
I know it is not true that he does not grasp the situation. T 
know he is an honest man who has never failed in his duty to 
his State or to his constituents; and for those reasons, with all 
due deference and with much regret that the question is here, 
I withdraw my request to be excused, and vote No. 


870 


Proceedings in Senate. 


Senator Cohalan.— In voting on this question I am mindful 
of what a great question it is and how much responsibility rests 
upon this House in determining whether the wishes of the Gov¬ 
ernor of this State are to be carried out; whether we are to concur 
with his recommendation, or whether we are to sustain Otto 
Kelsey the Superintendent of Insurance. I have approached 
this matter, Mr. President, simply and solely from the standpoint 
of a juror sitting in a case. I have not the pleasure of an 
acquaintanceship with Mr. Kelsey more than bowing occasionally 
to him since I came to Albany; and I have met the Governor of 
the State on two separate occasions. I do not think this is a 
case where friendship for Mr. Otto Kelsey or friendship for 
Governor Charles E. Hughes should take any part. We are here 
to decide whether it is just and right that a man who has rendered 
honest and fair service to the people of the State of Hew 'iork 
should be removed from office because of a whim or caprice, 
without any charges coming from the man whom the people of 
this State have selected to be their Governor for two years. I 
look upon this thing in the light that there are no charges here 
against the Superintendent of Insurance; that the Governor of 
the State of Hew York, Charles E. Hughes, simply comes before 
the Senate, who are the sole judges of the question, and says: 
“ I do not think Otto Kelsey is a proper person to be Superin¬ 
tendent of Insurance; I do not charge that he is dishonest or has 
mismanaged in any way the office to which he was appointed by 
my predecessor, but I simply want to state to the Senate of the 
State of Hew York that I disapprove of him because T do not 
think he has read the Armstrong report; because I think he has 
retained in office two men whom the Armstrong Committee report 
shows to be dishonest; and for these reasons, not urging 
that Mr. Kelsey has neglected his duty, nor that in his public 
career he has acted disgracefully or dishonestly in any way, I call 
upon the Senators of the State of Hew York — not to exercise 
the God-given right of every man to judge for himself, irre¬ 
spective of the attitude of newspapers or of any man in the 
State of Hew York, or of any man in the United States, or of 
anv bodv of men in the State of Hew York or of any body of men 
in the United States, not to act honestly and sincerely and ac¬ 
cording to the dictates of their own consciences in this matter, 
but simply to remove him upon the two grounds I have stated. 
T want to say, Mr. President, that T yield to no man in the 




respect I have for Charles E. Hughes, in the respect I have for 
the Governor of the State of New York. I do not look upon this 
as a political question. I regard it as a matter which rises above 
and beyond any question of interest solely to the Republican or 
the Democratic party. I .want to say that the respect I have for 
this man as Governor of the State of New York is not the 
lespect which some of the men in this House seem to have for 


him. it is not the respect of an inferior for a superior, which 
a slave has for his master, but it is the respect of an equal for an 
equal, because when I stand here or elsewhere as an American 


citizen 1 challenge the world to say I am not the equal of Charles 
E. Hughes or any other man that breathes the breath of life; 
and it is in that way that I have respect for the Governor. But 
that does not mean that I think whatever the Governor says is 
right. I reserve my right as a Senator and as a citizen of the 
State ot New Fork to think for myself on every public question. 
When I stand on the floor of this House I do not stand as the 
creature of the Democratic party; or of any organization; but 
I stand here as John P. Cohalan, the Senator from the Twenty- 
second Senatorial District of the State of New Y r ork, a man 
selected by the people of that district to represent them in this 
Senate; and I represent all the people in that district, no matter 
what may be their party allegiance; and when I stand and voice 
my sentiments on this floor I am going to do it according to the 
dictates' of my conscience. 

So it w T as that I entered upon consideration of this Kelsey 
matter. I did so entirely free from friendship for or prejudice 
against either party. When I went into the meeting of the 
Judiciary Committee to consider how w r e w r ould take up this 
matter I went there thinking it was our duty to give a fair 
opportunity to the Superintendent of Insurance to come before 
that committee and say what he had to say as to why the recom¬ 
mendation of Governor Hughes should not be carried out. 

I was surprised on entering the committee meeting to find men 
who had sat in the same House with Mr. Kelsey, men who had 
known Mr. Kelsey and been with him for a number of years, 
who — as said by the Senator from the Forty-fourth — went into 
that committee with their compasses boxed and with their minds 
made up as to how they would act on this question before any 
evidence had been submitted ; men “ who would crook the pregnant 
hinges of the knee that thrift might follow fawning.” 



872 


Proceedings in Senate. 


I now refer to the Senator from the Forty-sixth and some others 
that did not go there to sit in judgment as an honest American 
citizen sitting in judgment on his fellow citizen; but they went 
into that committee, particularly the Senators from the Forty- 
sixth and from the Nineteenth, determined in order that they 
might gain the friendship and esteem of the newspapers and a 
little public clamor that they would sacrifice the man who had 
stood up as a model of public honesty and esteem, determined that 
justice should not be done but that they seeking their personal 
aggrandizement were willing to see the man they had before them 
sacrificed, thinking, miserable sort of creatures they were them¬ 
selves, thinking that they would curry favor with the Governor 
by saying that the man up for trial should not be heard; by doing 
away with the old American doctrine that a man on trial should 
have an opportunity to present himself before his accusers and 
state his side of the question. But they went there determined 
that the man accused by the Governor of the State of New York 
must necessarily be guilty. They went there, not to consider the 
merits of the case, but seeking to curry favor with the man who 
has been made Governor of the State of New York, and thinking 
that by setting aside all principles of fairplay they would gain 
newspaper notoriety, and thereby attain a standing that their 
merits would not have entitled them to. 

I am not going to be led away by public clamor, or by what the 
newspapers wish me to do or by what the Governor of the State of 
New York may wish me to do. I do not care whether the Gov¬ 
ernor of the State of New York vetoes or does not veto any legis¬ 
lation I may have passed here. When I have had that legislation 
passed I have done my duty. If the Governor of the State of New 
York sees fit to veto that legislation the responsibility rests with 
him; but if as expressed by some of his friends they are desirous 
of being with him, not because they think Mr. Kelsey is wrong 
or that the Governor is right or wrong, but because they have 
some little legislation, and they think the Governor of the State, 
if they do not vote dishonestly and unfairly, that the Governor 
of the great State of New York would stoop so low as to veto their 
legislation, or to take some one of their friends out of an office 
which he had occupied. 

If their view is correct then I say, if the Governor of the State 
of New York would descend so low as to so use his prerogative of 
office to drive any man on this floor, to drive him to vote differently 


Address of Senator Coiialan. 873 

from what his conscience would direct, then I say such a man is 
not tit to be Governor of the State of New York, or to hold any 
office in the gift of the people of the State of New York. I do not 
believe, Mr. President, in indulging in personalities on this mat¬ 
ter ; but I cannot but remember in the speech of the Senator from 
the Nineteenth this evening, in which he cast slurring remarks 
upon the Senator from the Fourteenth and others around this 
circle, I cannot but remember an occurrence which took place in 
this chamber one year ago to-night, when I as a member of the 
Assembly sat in the back part of this room and saw this same dis¬ 
tinguished Senator from the Nineteenth, who, rumor said, was 
acting at that time not as the Senator from the Nineteenth, but 
as the counsel for the Allied Real Estate Interests of the State of 
New Fork, get down on his knees back of the Senator from the 
Fourteenth, whom to-night he slurred, get down back of him on 
bended knees begging him for God’s sake to pass the Mortgage 
Tax Law, not to suit the personal views of the constituents of the 
distinguished Senator, but to help him earn the miserable fee he 
was to earn from the Allied Real Estate Interests of the- city of 
New York; and I cannot but help in listening to the remark of 
the distinguished Senator from the Forty-sixth, in remembering 
the testimony that came out before the Judiciary Committee in 
this proceeding, when I heard Otto Kelsey testify about a letter 
which said that in the month of January of this year the distin¬ 
guished Senator from the Forty-sixth was glad to receive from this 
man he now thinks not fit to be the Superintendent of Insurance, 
a miserable, a paltry fee of $126.25 for advice which he gave to 
him as Superintendent of Insurance of the State of New York. 

I say if there is any charge which has appeared in all this 
testimony upon which a man should be driven from his office, to 
be dishonored and disgraced and to go down as a man unworthy 
of the office of Superintendent of Insurance, it was because he was 
no better a judge of human nature than to employ the counsel he 
employed. 

I want to say, Mr. President, that the only other charge which 
appears before us in relation to the Superintendent of Insurance— 
and I do not desire to take up too much time on this matter —• is 
the charge that ^ie did not remove from office two men, Hunter 
and Vanderpoel. He did not remove from office these two men 
discredited by that great prose poem known as the Armstrong 
Report, a book which will go down in history as the most won- 






874 


Proceedings in Senate. 


derful masterpiece of the human mind. The only charge that 
appears against this man in the message from the Governor or any 
other proceeding, is the charge that he did not remove Hunter 
and Vanderpoel from office — nu n who were shown to have been 
dishonest in their offices. 

If that is a proper charge on which to remove a man from office 
I want to know why the Governor of the State has not removed 
Bender, the fiscal supervisor, who has been proven by the Civil 
Service Commission to have been “ crookedand I ask also why 
he did not remove Railroad Commissioner Aldridge, charged with 
removing or allowing other people to take away $9,000,000 from 
the canal funds of the State of Hew York, when he was in office. 
If this failure to remove Hunter and Vanderpoel, two petty graft¬ 
ers, is ground for the removal of Otto Kelsey from office, then I 
say that the failure of Charles E. Hughes to remove the large 
grafters Aldridge and Bender, is a reason why Charles E. Hughes, 
to be consistent, should file his resignation as Governor of the 
State of Hew York. 

That is the only thing that appears in these charges. 

It has been testified to by the gentleman from the Forty-sixth, 
who has lived with Mr. Kelsey, has eaten at the same table with 
him and slept under the same roof with him for four years,— 
the gentleman who has served with him for a number of years in 
the Assemblv, the gentleman who a year ago to-day, when he re- 
signed as Comptroller of the State of Hew York and was appointed 
Superintendent,of Insurance, would have been proud to have been 
seen walking down the same side of the street with this same Otto 
Kelsey; who would have been proud to have Otto Kelsey recognize 
him as a friend ; it lias been testified by this man that Otto Kelsey 
is in every respect an honorable man, that he is an honest man, 
that Otto Kelsey is a man of rare ability, and that the only reason 
Otto Kelsey has shown in all his public life why there should be 
the slightest idea of removing him from public office, on the 
ground that he is unfit to he continued in office, is that he has not 
continued to consult as his attorney the distinguished Senator from 
the Forty-sixth, or that he made the mistake of retaining him as 
his attorney so late as the month of January of this year. 

How, as I said, it is not a political question; but the gentle¬ 
man from the Forty-sixth, assuming the role of a prophet, did not 
have all the equipment of a prophet. lie should have put a veil 
on, so that he would have been the veiled prophet, the Veiled 



875 


Address of Senator McCall. 

Prophet of Rochester, and I think he sees the defeat of the men 
who ha\ e the honesty to stand here and say what they think, and 
vote as they think. lie warns the man who believes that the 
Governor of the State has made a mistake, the men who have 
sufficient manhood not to crawl and cringe, he predicts that these 
men will not be re-elected; that they are serving their last term 
in office. He states it would be a proper thing for the Democratic 
party to bow to his wishes and to side with his views in the mat¬ 
ter; and tells the Democratic party in the State of Hew York 
that if it would take his advice, the advice of the distinguished 
Senator of the Forty-sixth, that then it will have some future 
opportunity to exist and elect some men to office; but as it fails 
to take the advice of the greatest Senator that ever lived, it misses 
its opportunity. I desire to say to him, as a member of the Demo¬ 
cratic party and as a Senator from the State of Hew York, that 
when the day shall come when I shall be unable to get up on this 
floor and act on this floor as my conscience and honor dictate; 
when the day comes that I shall have to bend my knee at the nod 
of royalty to receive the instructions of a leader or a Governor of 
the State of Hew York, then I say I do not desire longer to re¬ 
main in public life or to hold public office. My only desire is to 
hold public office as long as I am free to decide on my own con¬ 
victions, and as long as I have that desire I have faith in the peo¬ 
ple of my district, and as long as the people of my district find 
that I act according, to the dictates of my conscience, and am 
swayed only by my conscience and the light that I have, I care 
not wdiat the opinion of the Senator from the Forty-sixth may be 
on that subject. 

Mr. President, I withdraw mv request to be excused from voting 
and vote in the negative. 

Senator Armstrong.— Mr. President, I rise to. a point of order. 

The President.— The Senator will state his point of order. 

Senator Armstrong.— In view ofdbe two speeches we have had 
on this roll call, I suggest that the rest of the Senators who desire 
to u speak in the cold light of reason and of facts v be limited 
under the rules to the five minutes which they allow, so that the 
roll call may be completed to-night. I did not desire to limit the 
last speaker, as T rather enjoyed his remarks. 

Senator McCall —Mr. President, I ask to be excused from 
voting in order to explain my reasons. 




876 


Proceedings in Senate. 


Mr. President, I have waited all day to-day and all night to¬ 
night listening to the remarks of Senators around the circle; and 
like my friend from the Forty-sixth I desire to say at the outset 
that I believe in being with the Governor of this State when he 
is right, and against him when he is wrong. I think in this case 
the Governor is wrong. In conjunction with the Senator from the 
Twelfth District I occupy a unique position on this floor, inas¬ 
much as both of us are in the insurance business in New York 
city, and as a juror sitting in this case I have come to the con¬ 
clusion as I said, that on this occasion the Governor is wrong. 

If I was anxious to make inquiries about farming I would go 
to some farmers of the State and ask their opinions; so when I 
was anxious to find out the opinion that the insurance men of the 
city of New York have of the present Superintendent of Insurance 
I went to those men and asked their opinion. The answer was 
brought to me by my partner in New York city yesterday after¬ 
noon, and it was to the effect that out of the forty odd companies 
doing business in the city of New York, not one of the fire in¬ 
surance companies but was in favor of retaining Otto Kelsey. 
Now I desire to read a statement out of one of the leading, 
the leading, fire insurance paper of New York city, in relation to 
what my friend the Senator from the Forty-second alluded to as 
coming from George F. Sheldon, President of the Phoenix In¬ 
surance Company, one of the largest insurance companies doing 
business in the city of New York. It complimented the adminis¬ 
tration of Otto Kelsey highly and also paid a high compliment to 
Robert Hunter. Mr. Sheldon said that in his capacity as Presi¬ 
dent of the Eastern Union, an organization of about forty fire 
insurance companies, that he had given to Hunter and to Vander- 
poel information regarding the condition of the fire insurance 
companies after the San Francisco fire. He said that had any 
other examiner come to him he would have told them about his 
own company but would not have informed them about the con¬ 
ditions of the other companies. He said lie had confidence in the 
two men and his confidence had increased. 

As a practical fire insurance man of this State I know positively 
that if it hadn’t been for the ability displayed by Otto Kelsey 
after the recent fire in San Francisco, half of the fire insurance 
companies doing business in this State would have been forced 
into bankruptcy. 

Who is it asks that Mr. Kelsey be removed? Is there a fire • 


r 


Address of Senator Smith. 


877 


insurance company in the State that has asked for his removal ? 
or any insurance company in the State that has asked for his 
removal ? 

Now, if you are not going to take the opinion of people in 
position to know, whose opinion will you take ? 

As one of the jurors in this case I am willing to be guided by 
the people who come in daily contact with the insurance depart¬ 
ment of this State and abiding by that opinion. 

I withdraw my request to he excused from voting and vote No. 

Senator Smith.— Mr. President and Senators, I shall vote 
against concurring in the recommendation of the Governor for the 
removal of the Superintendent of Insurance for the reason that 
so far as I know no reason is apparent to anybody why he should 
be removed; and for perhaps what is the better reason, that no 
reason has been shown to the Senate why he should be removed 
from office. 

It is true that the Senate has received a communication from 
the Governor in which he has seen tit to say that Mr. Kelsey has 
conspicuously failed to perform obvious duties of the first im¬ 
portance and has neglected to demonstrate his fitness for the trust 
confided to him. Put no facts have been cited by the Governor; 
no facts have been shown by the evidence here to warrant him or 
anybody else in arriving at that conclusion. The only reason 
assigned which is based upon anything which approaches facts, is 
the suggestion that Mr. Kelsey conspicuously failed in the per¬ 
formance of his duty in failing to remove from office Hunter and 
Vanderpoel. 

I do not intend at this late hour to comment upon the testimony 
which to my mind had justified Mr. Kelsey in retaining the 
services of those men as long as he did retain them. I simply 
desire in that connection to call the attention of the Senate to the 
fact, that the only speech which has been made in this Senate whiQh 
approaches an argument why Mr. Kelsey should be removed, was 
the speech of the Senator from the Forty-sixth in which he called 
attention to the testimony of Mr. Kelsey upon his inquisition 
before the Governor. It may be true that if all of the evidence 
before the Senate was that fragment read bv the Senator from 
the Forty-sixth, that some reason might exist why the Senate 
should seriously consider this question of removal. Put the 
Senator did not read all of the evidence. The Senator complains 


I 


878 Proceedings in Senate. 

as did tlio Governor, because Mr. Kelsey did not order an inde¬ 
pendent investigation into the affairs of the Department of In¬ 
surance. Why should he? That investigation had already.been 
had. It had already been had by the Armstrong Committee, and 
by the now Governor of the State, who was the inquisitor of that 
committee. That committee had made its recommendation and it 
had pointed out its supposed weak spots in the Department of 
Insurance. Why should the Superintendent of Insurance in the 
crisis which confronted him in the earthquake and conflagration 
at San Francisco, why should he then take the time of the Depart¬ 
ment and start an investigation of his own. There was no reason 
why he should do it; there was every reason why he should not do 
it under the circumstances; and in that inquisition before the 
Governor he told him that he was satisfied to abide by the result 
of the Armstrong Committee, and he determined when he assumed 
the office of Superintendent in due season, as soon as his hands 
were freed, to dispense with the services of Mr. Hunter and Mr. 
Yanderpoel. And I should think I was little short of treacherous 
to my commission as a Senator if I could find fault with that 
attitude. 

Among other things, let me say that the one thing in which the 
Governor certifies to this Senate as a consideration which warrants 
the removal of Mr. Kelsey is his failure to remove Mr. Hunter 
and Mr. Yanderpoel. Mr. Hunter is a resident of my Senatorial 
District, and I desire to say to the Senate now that there was not 
one word of testimony in the Armstrong Investigation that would 
warrant Mr. Kelsev or anv other man in removing from office Mr. 
Hunter. 

The President.— I shall have to call the Senator’s attention to 
the fact that he is exceeding his time limit. 

Senator Smith.— I would ask bv unanimous consent, Mr. Presi¬ 
dent, to be allowed to proceed a little longer. 

The evidence before the Armstrong Committee, with respect to 
Mr. Hunter, was the testimony that examinations were conducted 
from the Hew York office and that Mr. Hunter was in charge of 
the Hew York office. That was the testimony of Mr. Hendricks, 
the Superintendent of Insurance. The same was the testimony of 
Mr. Apt; the same was the testimony of Mr. Hunter himself, ex¬ 
cept that he was asked by the inquisitor if he was in charge of 
the examinations and he said be was practically not. He was per¬ 
mitted to explain what he meant by practically not. And what is 



Roll Call on Resolution. 


879 


the fact l J lie fact is as testified to by Mr. Appleton before the 
Senate Judiciary Committee, that there was never in the ten years 
of service of Mr. Hunter in that Department a time when he was 
vested with the authority or the opportunity to determine when 
an examination into the condition of life insurance companies 
were ^necessary or appropriate. There never was a time when he 
was vested with that authority, or with the authority of determin¬ 
ing or assisting in determining the question of the nature or the 
scope of an investigation of a life insurance company. 

There is not a word of testimony either before the Armstrong 

Committee or the Senate Judicary Committee to show that Mr. 

«/ 


Hunter ever had an opportunity to get inside of an insurance 
company to find out the insurance companies’ affairs, except on 
the one occasion, and that was the investigation into the affairs 
of the Equitable after the disclosures had been made; and of that 
no complaint has been made. 

There is the record, and I challenge any man to successfully 
assail it. 

Senator Agnew.— Mr. President! 

The President.— The Senator from the Seventeenth. 

Senator Agnew.—• Mr. President, I move that by unanimous 
consent the time of the Senator from the Twenty-fourth to speak 
be continued thirty seconds. 

Senator Smith.— I am done now, Mr. President. I say that 
I cannot vote for the removal of Mr. Kelsey. I could not unless 
I were willing to sacrifice truth, honor and manhood upon the 
altar of ambition or personal interest. Hoth withstanding my re¬ 
gret at being compelled to take a position which, according to the 
public press, is not going to be pleasant to the gentleman now occu- 
pving the Executive Chair, and for whom T have the profoundest 


respect, I am bound to take the position dictated by my own sense 


of honor and justice. 

I withdraw my request to be excused from voting, and vote Ho. 

(The Clerk announced the result of the roll call as Ayes 24, 
Hoes 27.) 

At 12:50 a. m., the President put the question: “ Shall the 
Senate concur in the recommendation of the Governor for the 
removal of Otto Kelsey from the office of Superintendent of 
Insurance?” and it was decided in the negative, as follows. 

For the affirmative. — Agnew, Armstrong, Burr, Carpenter, 
Cassidy, Cobb, Cordis, Davis, Dunn, Emerson, Eoelker, Puller 


880 


Proceedings in Senate. 


Gates, Gilchrist, Grattan, Heacock, Hiiiman, Knapp, O’Keil, 
Page, Saxe, Taylor, Travis, Wemple.— 24. 

For the negative .— Ackroyd, Allds, Boyce, Colialan, Cullen, 
Fancher, Franchot, Frawley, Grady, Harte, Hasenflug, Hill, 
Hooker, McCall, McCarren, McManus, Mullaney, Owens, Raines, 
Ramsperger, Smith, Sohmer, Sullivan, Thompson, Tully, White, 
Wilcox,— 27. . - . 

Mr. Raines moved that the Senate do now adjourn. 

The President put the question whether the Senate would agree 
to said motion, and it was decided in the affirmative. 

Whereupon, the Senate adjourned. 


INDEX 


4 


A. 

PAGE. 

Additional forms of policies. 

Addresses on resolution to remove Mr. Kelsey: 

Senator Allds. 8G7-869 

Senator Armstrong . 797'-81'2 

Senator Colialan. 870-875 

Senator Davis . 848-850 

Senator Franchot.^. 834-830 

Senator Fuller . 828-831 

Senator Grady . . . . 812-828 

Senator Hill. 850-853 

Senator Hinman. 762-773 

Senator Hooker. 779-780 

Senator McCall . 875-877 

Senator McCarren. 773-778 

Senator O’Neil. 832-834 

Senator Page . 787-797 

Senator Haines.•. 853-866 

Senator Saxe . 866-867 

Senator Smith. 877-879 

Senator Tully . 839-848 

Senator White . 780-787 

Affidavit of fire insurance companies. 635 

Agreement between New York Fire & New Hampshire Fire. 458 

Ainsworth, Danforth E., Counsel for Mr. Kelsey. 56, 70, 295 

Alexander & Green respecting standard forms. 115 

Allds, Senator . . . .. 79 

Address on resolution to remove Mr. Kelsey. 867-869 

American Protective Association letter. 236 

Appleton, Henry D.:. 92, 173, 213, 607-623 

* As to Mr. Hunter. 631 

Consulted Mr. Kelsey as to letters... 608 

Details of Department . 607 

Gain and Loss Exhibit. 612 

In re blanks . 612-619, 621 

Mail placed on Mr. Kelsey’s desk. 608^-610 

Sworn as witness . 607 

Armstrong, Senator. 73, 76-80, 150, 408, 472 

Address on resolution to remove Mr. Kelsey. 797-812 , 

As to changes in Department. 32, 33 

As to swearing Mr. Kelsey. 88 

Conference with Mr. Kelsey and Gov. Hughes.... 478-486 

881 

\ 














































882 


Index. 


PAGE. 

Consultation in re election. 310 

Deputy Attorney-General consulted . 047 

In re section 102. 333 

Preparing ballots for election. 252 

Procedure of Committee . 84 

Respecting bearing counsel before Senate. 713-710, 720, 730 

Respecting issuance of subpoenas .400-504, 500, 507-500, 521 

Respecting standard. policies . 144-147, 101 

Sent copies of standard policies. 102 

Armstrong report .'.. 470-471 

Assessment companies . 170 

Mr. Behan in charge of ..■. 031-035 

Attorney-General’s opinions: 

Germania Life election .:. 328 

Manhattan Life . 329 

See Mayer, Ex-Attorney-General. 

Auditing of annual statements . 90 

Authorizing issuance of subpoenas . 499-523 

B. 

Backus, J. Bayard, inspector of election, Mutual Life Ins. Co. 523 

Ballot for election of directors, prepared. 252, 273, 501 

Brief of Louis Marshall . 263 

Conference with Attorney General . 643 

Beddall, Edward F. 667-673 

Behan, Thomas F. 93, 631-635 

In charge of assessment and fraternal orders. 631 

Questioned by Senator Page . 634 

Sworn as witness ..-.. 631 

Blanks: 

Fraternal companies . 172-180 

Life companies . 212-227 

Mr. Appleton’s testimony .'. 512-519, 621 

Brief of life insurance companies respecting standard policies. 118-129 

Brief of Miles M. Dawson in re standard policy forms. 151 

Brief of Louis Marshall in re ballots. 263 

• * 

Business assessment orders .. 170-172, 228-240 


C. 

Chief Examiner, as to filling position. 31, 32, 386, 387 


Duties, etc. 100, 102 

Circular, Continental Fire Ins. Co. 442 

Circulars issued in re San Francisco fire.. 365-369 

'Circular respecting standard policy forms.. 148 

Civil Service Commission. 30, 31, 384 

Cobb, Senator, respecting hearing counsel before Senate.•. 726 

Cohalan, Senator, address on resolution to remove Mr. Kelsey. 870-875 










































Index. 


J 



PAGE. 

Committee of Actuaries brief. 118-129 

Drafted forms . 140 

Committee on Blanks . 173 

Compensation of inspectors . 316 

Continental Fire Ins. Co. circular. 442 

Cooperative business associations . 228-240 

Correspondence of Department .\.. 114 , 171 , 353 

Counsel for Mr. Kelsey . 50 , 70 

Counsel to be heard by Senate. .. 710-732 

Counting votes Mutual Life . 526-570 

New York Life .,. 571-600 

Crippen, C. S. 95 

Cunningham, John J., position in Department. 9, 34, 495 

D. 

Davis, Senator. 51, 55, 70, 71, 81 

Chairman of Judiciary Committee presiding... 55 

Respecting hearing counsel before Senate. 724-726 

Address on resolution to remove Mr. Kelsey. 848-850 

Dawson, Miles M.... 130, 139, 170 

Respecting standard policy forms.... 151, 157-160 

Details of Insurance Department. 92-104, 607 

Dutchess Insurance Company. 454, 457, 462 


E.. 

Election of directors. 

Brief of Louis Marshall. 

Counting ballots.'. 

System of counting votes. 

Testimony of J. Bayard Backus. . . :. 

Testimony of J. E. Lawslie. 

Employees of. Department. 

Equitable Life Assurance Society letter, section 97 

Examination of employees... 

Examinations of fire insurance companies. 

Examination of Mr. Kelsey before Governor. 

Expert accountants employed. 


114, 240, 331 

. 264 

. .'. 323 

_ 526-570 

.... 523-570 
.... 546—582 

. 92 

. 344 

. 37 

. 454 


322 


F. 

Farrelly vs. New York Life. 

Filing of policyholders’ lists... 

Financial condition of fire companies. 

Fletcher, Charles. 

Franchot, Senator, address on resolution to remove Mr. Kel-ey 

Fraternal and assessment companies. 

Fraternal endowment orders, from report. 

Fraternal orders... 

Fuller, Senator, address on resolution to remove Mr. Kelsey.. 


. 282 

. 240-247 

. 448 

. 386, 387 

. 834-839 

. 170, 171, 172 

. 175 

. 347-357 

. 828-831 














































884 


Index. 


G. PAGE. 

Gain and loss exhibit.... 216-223 

Mr. Appleton’s testimony. 612, 614, 618 

General Accident Fire and Life. 354-357 

Germania Life Insurance Company, in je election.. 328 

Governor Hughes’ message to Senate. 3 

Examination of Mr. Kelsey. 11 

(See Hughes, Governor.) 

Grady, Senator. 310, 363, 402, 409, 492 

Respecting issuance of subpoenas. 517-521 

Respecting hearing counsel before Senate. 727, 728 

Address on resolution to remove Mr. Kelsey. 812-828 

H. 

Hare, J. Montgomery...,. 675-680 

Hatch, Edward W., counsel for Mr. Kelsey. 56 

Address before Senate. 732-762 

As to swearing Mr. Kelsey. 82 

Opening address. 56 

Summing up before Committee. 686-710 

Hearing before Judiciary Committee. 55 

Method of procedure...,. 70-81 

Swearing Mr. Kelsey. 81-88 

Hearing counsel before Senate. 710-732 

Hearing on standard policy forms. 142 

Herrick, Harold. 680-685 

Higgins, Governor. 65-170 

Appointed Mr. Kelsey Superintendent. 90 

Transmitted letter of C. A. Moore. 407, 410 

Conversations with Mr. Kelsey. 472-480 

Conversations with Attorney-General Ma}er.637, 650 

Opinion of Mr. Kelsey. 627 

Hill, Senator, address on resolution to remove Mr. Kelsey. 850-853 

Hinman, Senator. 211, 215, 361, 362, 400, 408 

Address respecting issuance of subpoenas. 504-507 

respecting hearing counsel before Senate. 716 

on resolution to remove Mr. Kelsey. 762-773 

Home Life Insurance Company letter, section 83. 336 

Hooker, Senator, address on resolution to remove Mr. Kelsey. ...... 779, 780 

Hughes, Governor..-. 470 

Message to Senate. 3 

Examination of Mr. Kelsey. 11 

Sent copies of standard policies. 161 

Preliminary report submitted. 211 

Received form of ballot. 277 

Conference with Mr. Kelsey in re Armstrong laws. 478-486 

Letter to and answer from, in re affairs department. 487 

Interviews with Mr. Kelsey.. 488 

Refjuests Mr. Kelsey’s resignation. 489 

Letter from Mr. Kelsey declining to resign. 493 
















































I iN DRX. 


885 


Hunter, Hobert H.*. 

Governor’s message. 

Examination of Mr. Kelsey by Governor 

Reduction of salary. 

San Francisco lire. 

Respecting resignation. 

Mentioned to Governor Higgins. 

Senator Smith questions Mr. Appleton.. 

Testimony of Mr. Sheldon. 

In affidavit of lire companies. 

Testimony of Mr. Herrick. 


PAGE 

73, 75, 78, 99, 100, 105, 100 

. 7, 8 

. 10, 17, 18, 20-23 

. 19 

. 305, 300, 370, 390 

. 396-400, 401, 402, 407 

. 472, 473, 470 

. 021 

. 055, 058, 003 

. 000 

. 681, 082 


1 . 

Ilician’s Auxiliary. 349 

Inspectors of election. 313 

Insurance Law: 

« 

Section 101 . 108-108 

Brief of actuaries. 118-129 

Additional forms of policies.. 147 

Sending policies to Governor Hughes. 161 

Sending policies to Senator Armstrong. 162 

Section 103 . 212-227 

Section 94. 240-331 

Ballot sent to Governor Hughes. 277 

People ex rel. Alfred M. Shook. 279 

Farrelly vs. New York Life. 282 

Letters from International Committee. 292 

Lists of New York Life. 290 

Complaint of New York Life. 298 

Section 102. 332-335 

Section 103 . 335 

Section 97 . 342-347 

International Policyholders’ Committee. 242, 244, 248, 2., 1 

Complaints. 273-292 

Telegram .* . -78 

In re inspectors. 311 

Issuance of subpoenas. 499-523 


K. 

Keefer, David. 

Kelsey, Otto, Superintendent of Insurance: 

Message from Governor recommending removal 

Examination before Governor. 

Additional statement. 

Sworn. 

Beginning of testimony. 

Accepted appointment.-. 

Details of Department. 


44 


3 

11 

49 


89 


89 


90 

92 


\ 


/ 












































Index. 


88' 


PAGE. 


Studied Armstrong laws.. 

Standard forms of policies.. 

Consulted with Attorney-General. 

Consulted with Governor Higgins. r . 

Preliminary report. 

Submitted preliminary report to Governor Hughes 
Consulted with Senator Armstrong on election. . . 

Prepared ballots for election of directors. 

Sent Governor Hughes form of ballot. 


_ 10(i 

.... 108 
108, 109 
... 171 
180-211 
... 211 
... 212 
252—273 


Arrangements for counting ballots. 315 

Took personal charge of election. 325 

San Francisco fire. 305-470 

Respecting Messrs. Hunter and Vanderpoel. 390, 409, 424, 425 

Letter to Governor Higgins respecting C. A. Moore letter. 412 

Letter to New York Board of Trade and Transportation. 430, 435 ‘ 

Letter to Merchants’ Association.. . 439 

Consulted with Attorney- G eh e r a 1 in re foreign fire companies. 404 

Conversations with Governor Higgins... 472-478 

Interview with Governor Hughes and Senator Armstrong. 478-480 

Letter to and answer from Governor Hughes in re affairs of Depart¬ 
ment . . . .. 487 

Interviews with Governor Hughes... 488 


Governor Hughes’ request for resignation. 489 

Letter to Governor Hughes declining to resign. 493 

Rulings of Department.‘.. . 008, 026, 630, 031 

Conferred with Attorney-General as to fire situation. . .. 038 

Governor Higgins’ opinion of. 051 

Attorney-General Mayer’s opinion of.. 052 

In affidavit of fire insurance companies. 001 

Mr. Sheldon’s opinion in re fire situation. 060 


L. 

Lawshe, Jay E., inspector New York Life election. 570-000 

Letter to Governor Hughes from Mi - . Kelsey declining to resign. 493 

M. 

Manhattan Life insurance Company election. 329 

Marshall, Louis... 254, 255 

Brief in re ballots. 263 

Mayer, Julius M., Ex-Attorney-General, counsel for Mr. Kelsey..56, 70, 72 

80, 011-629 

Consultations with. 168, 109, 480 

Sworn as witness. ..7r.. 035 

Conversation with Governor Higgins as to San Francisco fire. 037 

Consultation with Mr. Kelsey as to San Francisco fire. 038 

Mr. Kelsey consulted with. 638—642 

Conference as to ballots and election. 041-646 

Conference with Governor Higgins. 050 

Opinion of Mr. Kelsey. 052 










































Index. 


887 


PAGE. 

McCall, Senator, address on resolution to remove Mr. Kelsey. 875-877 

McCarren, Senator. 07 , 72,-21)5, 380, 384, 387, 401, 401) 

As to San Francisco fire. 420, 441, 070 

Address on resolution to remove Mr. Kelsey. 773-778 

*/ 

Mclntosli, James, counsel. (See New York Life Insurance Company.) 
Memoranda at conference with Governor Hughes and Senator Armstrong. . 480 

Merchants’ Association of New York, letters. 438 

Message from Governor Hughes.✓. 3 

Metropolitan Life, letter in re section 101. 104 

Moore, C. A., letters in re San Francisco tire. 407, 410 

National Casualty Company. 350-354 

National Life Insurance Company, in re section 103. 224 

New York Board of Trade and Transportation letters. 420 

New York Fire Insurance Company. 458 

New York Life Insurance Company, in re section 103. 220 

In re election. 240, 250, 251 

Inquiries in re lists. 200 

Complaint against International Committee. 208 

Election. 571-000 

New York office of Department. 00 

New York Safety Reserve Fund letter. 234 

North German Fire Insurance Company report. 440 


O. 

Oath for Mr. Kelsey. 

O'Neil, Senator, address on resolution to remove Mr. Kelsey. . . . 

Opinion of Mr. Kelsey, Governor Higgins. 

Mr. Mayer. 

Mr. Sheldon. 


. 81-88 
832-834 
... 051 
... 052 
... 000 


P. 

Page, Senator. 75, 133, 134. 320, 403, 404, 402 

Respecting answering letters.*... 358, 437 

Respecting issuance of subpoenas... 514—517 

Respecting hearing counsel before Senate. 723, <24 

Address on resolution to remove Mr. Kelsey. 787-797 

Questions Mr. Appleton. 613, 079, 021 

Questions Mr. Paterson. 627, 029 

Questions Mr. Behan. 634 

Participating and non-participating policies. (See Insurance Law, § 102.) 

Paterson, John 8. 04, 134, 144-147, 300, 580, 023—031 

Sworn as. witness. ... .. 623 

Rulings made by Mr. Kelsey. 620, 030 

Questioned by Senator Page. 627, 029 

Standard forms of policies. 624, 025, 029-031 

People ex rel. Alfred M. Shook. ^6 

Petition of life companies in re section 101. 100 

Policyholders’ letters. 

Policyholders’ lists.^. 











































888 


Index. 


PAGE. 

Postal Life Insurance Company... 160 

Preliminary report of Insurance Department for 11)07. 180-211 

In re section 1)4. 260 

In re section 101 .. 334 

' In re section 102 .. 335 

Promulgating standard forms of policies. 132, 142 

R. 

Raines, Senator. 657, 664, 665 

Reference of message. 51 

As to procedure of Committee. 82, 87 

Respecting issuing subpoenas. 5011-514 

Respecting hearing counsel before Senate. 720-723 

Address on resolution to remove Mr. Kelsey. 853-866 

Reduction of salaries of Mr. Hunter and Mr. Vanderpoel. 19 

Reorganization of Department. 19 

Report of Armstrong Committee as to being read by Mr. Kelsey. 13, 14 

Reports of companies... 95 

Report on examination: 

Mutual Life. 5, 25 

Equitable . 5 

New York Life. 6 

Report of Insurance Department. 212 

Reports on examination after San Francisco fire. 448 

Resignation, Governor Hughes requests Mr. Kelsey’s. 489 

Resignation of Mr. Huntfer. 101, 3U0-402, 407 

Letter.- 425 

Resignation, letter from Mr. Kelsey declining to resign. 493 

Resignation of Mr. Vanderpoel. 396, 401-409 

Letter... 424 

Resolutions of foreign fire insurance companies'.. 465 

Resolution reported from Judiciary Committee. 710 

Roll call on resolution to remove Mr. Kelsey. 879 

Rulings of Department, section 101. 163, 166 

Section 103 . 224-227 

Section 94 . 240-331 

Section 102 . 332*-335 

Section 83 . 335-341 

Section 97.;. 342-347 

Rulings of Mr. Kelsey. 610, 626, 630, 631 

S. 

San Francisco fire. 40, 364-470 

Circulars issued. 365-369 

Work of Mr. Hunter and Mr. Vanderpoel.. 365, 366, 370, 374, 378, 380 

381-396, 407 

Special statement. 378 

Effect on financial circles. 379 

Letters from insurance companies. 588 












































Index. 889 

PAGE. 

Letter from C. A. Moore. 410 

Lettei fiom New \ork .Board of Trade and Transportation..-. 429 

Letter from Merchants’ Association of New York. 438 

Foreign insurance companies. 463 

Conversations with Governor Higgins. 473-478 

Mr. Appleton's testimony. 610, 611, 616, 619, 620 

Mr. Mayer’s testimony. 636 

Testimony of Mr. Sheldon. 553 . 666 

Affidavit of various companies. 659 

Testimony of Mr. Beddall. 667-673 

Testimony of Mr. Hare . . . .-... 675-680 

Testimony of Mr. Herrick.r. 680^-685 

Saxe, Senator . 718, 719 

Address on resolution to remove Mr. Kelsey. 866-867 

Scrugham, George B., secretary. (See International Policyholders’ Com¬ 
mittee.) 

Select fusion ticket . . . :. 254 

Sheldon, George P. 653-666, 673-675 

Smith, Senator. 86, 255, 363, 374, 382, 384, 398-401, 409, 427, 635 

Questions Mr. Appleton.!. 621 

Address on resolution to removd Mr. Kelsey. 877 , -879 

Speeches before Senate on resolution to'remove Mr. Kelsey. (See ad¬ 
dresses, etc.) 

Standard forms of policies: 

Mr. Paterson. 624, 625, 629, 630, 631 

Submitted by companies. 108 

Additional forms of policies..*. 147 

Copy sent to Governor Hughes. 161 

Copy sent Senator Armstrong. 162 

Statement of Air. Kelsey submitted to Governor after examination. 49 

Subpoenas, issuance of .. 499, 523 

T. 

Town and county co-operative fire insurance associations. 357, 358 

Tully, Senator, address on resolution to remove Mr. Kelsey. 839-848 

U. 

Untermeyer, Samuel, counsel. (See International Policyholders’ Com¬ 
mittee.) 


V. 

Vanderpoel, Isaac. 75, 77, 78, 100, 448, 463 

[Message of Governor . 6 

Examination of Mr. Kelsey by Governor. 16, 24, 25, 26, 27, 28, 29 

tlUj oo 

. 19 

. 365, 366, 370, 374, 378, 380, 381, 382, 383, 384 

386, 396 


Reduction of salary 
San Francisco fire. . . 





































Index. 


890 


PAGE. 

Respecting resignation . 390, 401-409 

Mentioned to Governor Higgins. 472, 473, 470 

Newspaper articles respecting resignation. 500 

Testimony of Mr. Sheldon. 055, 058 

In affidavit of fire companies. 000 

Testimony of Mr. Beddall . (507, 071 

Testimony of Mr. Hare . 078, 079 

Testimony of Mr. Herrick . 050-059 

Votes, system of conducting. 520—570, 571-000 


* W. 

Witnesses, as to being called. 70 80 

Issuance of subpoenas for. 250, 490-499, 523 

Wolfe, S. Id... 218, 220 

White, Senator, address on resolution to remove Mr. Kelsey. 780-787 


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